Apr 9 • Hugh Martin

CIMA SCS Pre-seen insights: Leothayre (May-25/Aug-25)

The pre-seen for the upcoming May-25 / Aug-25 CIMA SCS exam is based on a company called Leothayre, a small satellite solutions company based in the country of Wexland.
You can download the pre-seen from the CIMA website by clicking the link here.
The FREE video version of this pre-seen analysis can be found here.

Industry

Types of satellites

A satellite is an object in space that orbits around a larger object. In this context, we will be talking about artificial satellites, which are communication devices that orbit the earth. Satellites can also be natural, such as planets orbiting the sun.
There are approximately 10,000 satellites in orbit around the Earth, and this is expected to grow significantly in the next few years. From this, we can interpret that the satellite industry it's going to grow.
  • The term orbit refers to the path the satellite takes around Earth. Satellites can be classified by orbits:
  • Geosynchronous (GEO) – Approx. 36,000km from earth’s surface
  • Medium Earth Orbit (MEO) – Approx. 5,000 to 15,000km from Earth’s surface
  • Low Earth Orbit (LEO) – Approx. 500 to 1,000km from Earth’s surface
Both in the real-world, and in the world of the pre-seen, the vast majority of the world’s satellites operate at LEO. The pre-seen notes that 12% of active satellites are GEO, 3% are MEO and 85% are LEO.
Satellites can also be classified by mass (weight). The pre-seen notes different satellite weights, but the most important category is the small satellite one, because this is what Leothayre specialises in. Small satellites are those which weigh less than 100kg. The pre-seen notes that there has been market growth for Nano and Micro satellites.
A class of nanosatellites has been called “CubeSats”. A standard CubeSat is a cube measuring 10cm x 10cm x 10cm. One CubeSat is equal to 1U or “one unit”. CubeSats come in different configurations, with 1.5U, 2U, 3U, 6U, 12U being noted in the pre-seen. The type of mission will determine the appropriate configuration.

Satellite missions

  • The purpose of a satellite is referred to as its mission. Satellites can be used for many different types of missions:
  • Communications – Satellites enable the transmission of data between locations, which facilitates services like satellite internet
  • Navigation – Satellites are used to determine precise locations, which facilitates services like postage tracking
  • Earth observation – Satellites can be equipped with sensors that can detect matters of interest, which facilitates services like weather monitoring
  • Research and development – Satellites are used to carry out a variety of applied research and development, such as in-space manufacturing and deep space scannin

Orbits

GEO Satellites constantly observe or communicate with a fixed area on the Earth’s surface. The reason why this is the case is because satellites in GEO orbit follow the same rotational speed as Earth and thus it looks like they are hovering over Earth.
Non-GEO satellites move faster than earth’s rotational speed. This means that they observe a moving area, which creates issues for companies. To overcome this issue, a company will use a chain of communicating satellites known as a constellation.
With a constellation of satellites, once one satellite moves past the area of observation, another satellite will take its place so there is a constant view on it.

Ground stations

Ground stations are facilities on Earth used to communicate with satellites. Communication involves sending and receiving signals. Ground stations differ in terms of size and complexity.
It is possible for ground stations to be built into vehicles. If you’ve been to a live sporting event or a big concert, sometimes you will see vans with satellite dishes on them. These vans are effectively mobile ground stations used for live broadcasting.
It is also possible for portable devices to directly communicate with satellites using antennae. If you’ve used a satellite phone before, you will likely be familiar with the big antennae at the top of the phone. These devices are used to communicate in remote locations.

Launching Satellites

Satellites are launched into orbit using rockets. Some rockets can carry multiple satellites, depending on the size of the rockets and the satellites.
  • There are three main components to a rocket:
  • Payload bay – This is the top of the rocket and covers the satellite being launched
  • Final stage – This is the middle of the rocket, it brings the payload to its destination
  • First stage – This is the bottom of the rocket, it brings the rocket from earth to the upper atmosphere
The process for bringing the payload to its intended destination is as follows:
  1. The rocket is launched from a launch pad, with the first stage igniting and bringing the rocket to the upper atmosphere.
  2. The first stage then detaches from the rocket (jettisoned), making the overall rocket lighter. The final stage then ignites and brings the payload to its intended destination. 
  3. The rocket reaches its destination (LEO, MEO, GEO etc) and the satellite is deployed, with the final stage deorbiting or remaining as space junk
Rockets require launch sites that have infrastructure. Spaceports serve as launch pads for large rockets and the pre-seen notes that there is a spaceport in Wexland. 
It is better to launch a rocket in an easterly direction from the earth’s equator. Earth moves from west to east, with this movement being fastest at the Earth’s equator. Therefore, launching easterly from the equator allows the rocket to take advantage of this existing rotational velocity.
If a rocket is taking advantage of the Earth’s rotational velocity, it therefore needs less fuel and is more profitable to launch. It is possible though to launch in the other direction, and to launch from North to South rather than easterly than from the equator.

Company

Operations

  • Leothayre offers a complete service to clients:
  • Initial consultation – Analysing the client’s needs and determining the satellite solution required for the mission
  • Design, build and test – Creating the satellite in the company’s workshops, and thoroughly testing it before launch
  • Negotiates launch slots – Negotiates launch slots with launch providers, clients can do this part themselves if they want
  • Ground station control – Controlling the mission, sending instructions and gathering data from the satellites
The company does not operate its own rockets, but instead has a close relationship with launch providers. Interestingly, this creates a testable dynamic where Leothayre is not directly responsible for the damage caused by rockets, but it does support the rocket industry.
The company has a basic satellite body called the Leothayre Standard, which is a CubeSat that can be supplied in 3U, 6U or 12U configurations. It is quicker to adapt this model than to design a satellite from scratch.
Leothayre has successfully launched 64 satellites and has a substantial number of orders awaiting fulfilment.

Editor’s note

We don’t know why there are a substantial number of orders awaiting fulfilment, it could be that the business has capacity issues, or it could be because of supply chain issues. In any respect, this could form the basis of a potential scenario.

Strategy

Leothayre's mission is to lead in the creation and operation of satellites that meet the needs of clients for space-based facilities.
Leothayre’s vision is to provide space-based facilities that can enhance the quality of life on Earth.
  • Leothayre’s values are as follows:
  • Chooses excellence in all decisions
  • Constantly innovates, anticipating client needs
  • Insists on fairness and respect in the workplace
  • Develops and maintains strong relationships with clients
  • Acts with integrity and never promises more than it can deliver

Editor's note

These are important to be aware of because, in the past, CIMA has examined the evaluation of a company’s strategy through its consistency with either the mission, vision or values. Please note that strategies may not always be consistent and may either be rejected on that basis or the mission, vision or values may be adapted to reflect the new strategy.

Governance

  • The governance structure is as follows:
  • Five executive directors
  • Four non-executive directors
  • There are four board committees:
  • Risk committee
  • Nomination committee
  • Audit committee
  • Remuneration committee
Each committee has three non-executive directors. The Chair sits on the audit committee, which goes against the UK Code of Corporate Governance (2024).
The Chief Internal Auditor reports to the convener of the audit committee, which demonstrates that the company
  1. Has an internal audit department
  2. Applies good governance, as this helps to mitigate intimidation and familiarity risk for the internal audit department

Editor's note

You may be faced with a situation where a new committee is created. It is not abnormal for large organisations to have other committees at a board level (e.g. sustainability committee)

Financials

  • Leothayre year on year comparisons:
  • Revenue growth +6%
  • Operating profit +24%
  • Net profit after tax +16%
  • Leothayre key ratios
  • Non-current tangible assets to total non-current assets 84%
  • Gearing (D / D+E) 50%
  • Effective interest rate 10%
  • Dividend payout ratio 37%
Orbalinc is Leothayre’s competitor and has been in business for slightly longer.
  • Orbalinc year on year comparisons:
  • Revenue growth +13%
  • Operating profit +29%
  • Net profit after tax +75%
  • Orbalinc key ratios
  • Non-current tangible assets to total non-current assets 83%
  • Gearing (D / D+E) 49%
  • Effective interest rate 10%
  • Dividend payout ratio 25%

Share price

  • Leothayre’s share price has steadily declined from March 2020 to March 2025:
  • Peak W$22 on March 2020
  • Trough W$2 on May 2024
There are no reasons provided in the pre-seen for the decline.
  • However, it may be because of
  • Missed financial targets
  • A lack of risk management over key risks
  • Superior competitor performance
The company’s beta is 1.15, which means that its share price is more volatile than the overall market, on average.

Supplementary

Additional information

The ‘Happy Comic’ articles in the pre-seen documents are typically used to provide supplementary information on the industry.
In this case, the article shows that rockets are transported in stages to spaceports. The need for infrastructure around spaceports means that Leothayre must engage with the government if it were to ever have its own spaceport.
  • As well, the environmental damage of rockets are noted, with damage being multifaceted:
  • Rockets themselves emit greenhouse gasses and soot
  • Rockets discharge these harmful emissions directly into the atmosphere
  • When rockets jettison, some fuel may remain, which releases toxic vapour

Editor's note

It feels like there is an interesting dynamic where the mode of transport for satellites is environmentally damaging, but Leothayre isn’t a rocket launcher or manufacturer, so should they be responsible for the environmental damage caused?

Quality

Quality is a significant issue in this industry. The failure of a single component can be sufficient to cause a satellite to fail and bring its mission to a premature end.
Satellite manufacturers specify space-rated products when they order components and materials. They subject assemblies to vibration and vacuum tests at various stages of the build too.

Personalised forecasts

The pre-seen notes that there are free weather forecasts available from the Wexland Met Office. However, they do not always reflect the latest conditions and may not be sufficiently localised.
Large farming corporations may pay for localised weather forecasts, which come from LEO satellites. These forecasts are more accurate than the freely available ones.
The pre-seen highlights that for a farming corporation, delaying a harvest can improve yields and this decision is supported with accurate weather forecasts.
Other companies can benefit from these forecasts too. The pre-seen notes that builders and oil companies may also benefit from accurate, personalised forecasts.

Space Junk

Space junk is noted as a serious problem, this is where debris or redundant satellites sit in space, where they become a collision hazard. Space junk travels at fast speeds, which can result in a collision, making existing satellites non-operational. Old satellites often contain batteries or fuel that can explode, compounding the problem.
It is possible to design satellites so they fall out of orbit at the end of their lives, but that increases construction and launch costs significantly. The Wexland government is a signatory of the “Space Junk Charter” which is a non-legally binding charter that encourages the responsible use of space.
  • The charter offers standards that companies involved in the construction and launch of satellites are encouraged to adhere to:
  • The final stage of rockets will be designed to remain intact, with no detachable parts left in orbit during satellite deployment
  • The trajectory of the final stage will result in falling out of orbit shortly after deploying the payload, with the final stage disintegrating harmlessly during its return to Earth
  • Satellites should be designed to minimise the risk of explosion of batteries, fuel or any other volatile payload

Potential scenarios

Collisions

You could see a collision between one of Leothayre’s satellites and another satellite.
  • Questions could be asked about the:
  • Share price impact of the collision
  • Ways in which Leothayre could restore stakeholder confidence
  • Ethical implications of failing to take responsibility for the issue
  • Identification of key stakeholders and how each should be managed

Introduction of new laws 

You may see the introduction of new laws that help to manage the environmental impact of rocket launches. Let’s assume the new laws limit the number of launches that can occur in a month.
  • Questions could be asked about the:
  • Role of the risk committee and whether it failed to do its job
  • Ethical implications of lobbying the government to reverse the laws
  • Suitability, acceptability and feasibility of setting up our own spaceport
  • The currency risks of using or setting up an overseas spaceport

Cyberattack

A cyber attack is launched, which results in cybercriminals obtaining some of Leothayre’s data.
  • Questions could be asked about the:
  • Way in which the company’s share price can be protected
  • Currency risk associated with a cybersecurity contract
  • Adequacy of principal risk report disclosures in regards to cyber risk
  • Appointment of a non-executive director with a cybersecurity background

New service

Leothayre launches its own constellation of satellites which provide data that can be sold to individual customers on-demand.
  • Questions could be asked about the:
  • Cyber risks involved in providing this type of service
  • Role of internal audit in investigating the controls around this service
  • Impact of a share repurchase following the successful implementation of the service
  • Way in which risks associated with the service will be disclosed in the risk register

Find out more

If you are looking for more information on Leothayre, consider purchasing our Ultimate SCS Digital Textbook, which contains:
  • Full SCS theory coverage
  • Exam technique breakdowns
  • Pre-seen analysis May-25 / Aug-25 window
  • Industry analysis May-25 / Aug-25 window
  • Potential scenarios pack for the May-25 / Aug-25 window
  • Twenty questions and answers for the May-25 / Aug-25 window