Avanti Communications Share Discussion Threads

[jojaken] 13/2/2014 08:59

Here's Jefferies on the figures.

"1H results reveal revs +81% to $25.0m. Progress was strong in all areas according to mgmt. EBITDA turned positive ($1.0m) in 1H although this includes a $5.3m ex-gratia receipt from a supplier relating to HYLAS-2 renegotiation. Our current FY14 forecast implies revs doubling seq. to c.$50m in 2H. No financial guidance is provided, but mgmt. expresses confidence based on growth in the size / quality of the customer base and the level of repeat orders.

Strong revenue momentum. AVN reports 1H revenues of $25.0m (vs. 2H FY13: $18.3m, 1H FY13: $13.8m). The company now has 122 customers in 88 countries. It reports that 40 contracts were signed in the half, split 26/14 between new and repeat customers. Revenue momentum has benefited from AVN offering contracts that do not require a long-term commitment from the customer. Our published FY14 revenue forecast of £50m translated into c.$75m at the GBP:USD rate prevailing at end-FY13. Meeting that forecast would therefore require revenues to double in 2H relative to 1H.
Other operating indicators. Peak utilisation rates are disclosed as 49% on HYLAS1 (vs. 45% in June 2013) and 21% on HYLAS 2 (vs. 15% in June 2013). Backlog was $455m at Dec 2013 compared to £290m at June 2013 (which equated to c.$440m at the FX rate of the time). AVN guides that $76m of the backlog relates to 2015. Last Sept they guided that £46m of the backlog (equivalent to c.$70m) would crystallise in 2015. No figure is given for the amount of backlog relating to 2014. However, at the FY13 results AVN disclosed that £42m (equivalent to c.$64m) would drop in 2014. With revenues of $25m achieved in 1H then (adjustments aside), there should be c.$39m in the backlog for 2H 2014.

EBITDA positive. Avanti turned EBITDA positive during the period, with reported EBITDA of $1.0m. This is a welcome development, though we note that the performance was helped by $6.5m of other operating income in the period, of which $5.3m relates to an ex-gratia receipt from a supplier following the renegotiation of the HYLAS-2 procurement. Excluding this receipt, EBITDA would have been -$4.3m, nonetheless, an improvement from -$7.3 in 1H13 and -$5.6m in 2H13. Avanti had cash of $78.3m at the end of the period, which should provide comfortable liquidity for interest and capex obligations as EBITDA ramps in 2H14 and FY15.
Trade receivables increased to $28.6m at end-Dec (seven months of sales at the 1H run-rate), which is $7.9m higher than the end-June 2013 balance. AVN says that many customers are invoiced in advance. However, the press release makes reference to slower than expected collections from some customers who are growing, and to whom AVN gives credit terms rather than price reductions. AVN discloses that it has suffered only one customer default, which was a European customer buying Middle East capacity. Backlog has been adjusted. We note that the bad debt provision in the half was $1.4m, down from $2.5m in 2H13.

Current trading and outlook. No quantified guidance is provided. AVN says that business growth will remain difficult to forecast. However, it asserts that growth in the size and quality of the customer base and the level of repeat orders gives the mgmt. team firm belief that they are building a profitable and enduring business. Since the beginning of 2H, the company reports it has been awarded a large African government contract, won several million dollars of broadband business in Western Europe and launched new cellular backhaul pilots in Africa."

ends

What surprises me though is the reiteration of Buy with a price target of 580!

[via con] 13/2/2014 08:58

For your consideration

No position held,although have had in the past, but I´m sorry to say that this analysis yesterday spooked me

[ricardo125] 13/2/2014 08:58

Ouch share price tanking. So much for my expectation the share price would drift down. AIM can be such an unforgiving market for poor results.

[jojaken] 13/2/2014 08:35

Beaufort Securities started coverage on shares of Avanti Communications Group Plc (LON:AVN) in a report released on Thursday, Stock Ratings Network reports. The firm set a "speculative buy" rating on the stock.
Separately, analysts at Jefferies Group reiterated a "buy" rating on shares of Avanti Communications Group Plc in a research note on Wednesday. They now have a GBX 580 ($9.52) price target on the stock.

[woozle1] 13/2/2014 08:34

If you are interested in cash preservation, get out.

[aa29] 13/2/2014 08:28

Rob
Many investors are holding on here because they thought they'd be rich in 2011. They then thought HYLAS 2 would be their saviour in 2012. It wasn't, it's 2014 - they need to wake up to the analysis of what's happening to the cash balances.
The story isn't what they thought it would be.
Still time to get out.
AA29, an ex investor.

[caribbeanrob] 13/2/2014 07:46

I don't think these were posted previously:

Investors Chronicle view - Hold.



Satellite news report re deployment of services for Hermes in Iraq.




I'd be surprised if many investors here were holding for short term results. I think they were always likely to be disappointed if they were. My personal opinion is that the long term value of the business is still to be determined over the next couple of years and these latest results are still too early to call one way or another. I'd agree with the IC view as a long term hold.

[divinausa1] 13/2/2014 07:29

near £1 million quids worth...

[divinausa1] 13/2/2014 07:26

directors dont think so, as they have been big buyers this last 6 months

[simon cawkwell] 13/2/2014 06:41

opodio,

You have now.

Elsewhere, there is no escaping that Avanti is going insolvent. Call it filth if you wish. But I think most reasonable people would regard that assertion as important if correctly based.

Simon Cawkwell

[opodio] 13/2/2014 05:58

hi extrader
Sorry i don't read that lardy lump EKs filth myself ,its just what i picked up on the boards

[extrader] 13/2/2014 05:56

Hi opodio,

I'd be interested if you've got any specifics re EK's supposed reasons. He's said to be an accountant ...I'm just sharing what I read for myself from the results, he may have a different take on things.

Good luck to all holders.

[divinausa1] 12/2/2014 23:17

EK = buy signal

EK recently shorted QPP at 9p a few months later just hit 38p today...

[opodio] 12/2/2014 22:42

EK shorting AVN again I heard.

[woozle1] 12/2/2014 22:03

Well, that's v interesting and if you back out the ex gratin payments, then gross margin is declining, which confirms my fears that the company is striking contracts at uneconomic rates. Sadly, this is exactly what he did with Avanti Screenmedia. There are so many red warning signals. I wouldn't hang around. With the amount of debt, the shares could be worthless.

[extrader] 12/2/2014 18:38

Hi Rogk,

The results hide a hidden ugly.

Note 7 Other operating income
The ex gratia receipt arose following a commercial settlement in relation to the Hylas 2 procurement £6.5m

You've overstated this 'hidden ugly' (the settlement was for US$ 5342K, not £6500K) but there are several other 'gems' :

(1) EBITDA is trumpeted as positive $ 1M for the six months to 31/12. Not only does this include the $5342K above, it also glosses over that, going forward, I (= interest + amortised finance break and establishment costs)will be running at around $ 20M every full six months.Ignoring depreciation as a non-cash item, AVN is still cash negative to the tune of some $ 40M pa......

(2) EBITDA includes T for tax. Fair enough, there's no tax payable, but see the note on deferred tax credits :
No income tax credit or deferred tax asset has been recognised in respect of the losses for the six month period to 31 December 2013 (30 June 2013 $10.6 million tax credit recognised, 31 December 2012 $3.5 million tax credit recognised)
They've got $20.5M in deferred tax assets and I'm guessing they've been forced to recognise that these aren't going to be used (to offset profits tax) for the foreseeable.....

(3)They appear to have hidden a receivables write-off (last year's much-discussed receivable converted into a loan to a subsidiary IIRC?)
Loss on de-recognition of previous (6,827) - -
loans
'De-recognition' is a new one on me....

Guess we'll have to await the full audited results to get a better picture, but I think I've seen enough to be happy I exited on the last spike up to 250p.

Good luck to all holders.

ATB

[megabear] 12/2/2014 16:38

Brokers cutting their sales and EPS forecasts yet again today on back of interims. That's all they ever do when this company updates.

[woozle1] 12/2/2014 14:38

Well I'm going to sell. It's time I started looking at what's in front of me and not what I want to see. When I saw the rise in revenues, I skipped straight down to c/f statement to see if my fears were confirmed and, sadly because I did not want to believe it, the company are offering favourable terms to get revenues on board. They refinanced the EXIM loan because they could not live with the covenants. Everyday the capacity remains unsold is a lost one, that can not be recouped as these assets have finite lives. Moreover, with so much debt, the value is being slowly leached away from the equity.

Good luck to rest of you who want to hand in there. I was really spooked by the static gross margin. This should be accelerating with the revenue growth and it is not. The direct costs are fixed and, if they are, the company must be paying away something to get this revenue growth. DW has form in this regard.

W

[gorvachof] 12/2/2014 13:45

All these fantastic results over the last few years.

Why no £5 or £25 share price, Avanti has never let you down. "Proving the critics/doubters wrong" as always.

.....Maybe your just not getting it.

[jojaken] 12/2/2014 12:37

So the results are out.

So much for my optimism! The results were, to be honest, way below what I had expected.

What's worse, having read the results and crunched the numbers, I just can't get things to add up!

And then there is the obfuscation. Why leave so much unanswered and so much for the shorters to get their teeth into?

I'm not out, but I certainly am not buying any more for now on these results!

Before commenting more, I want to see what the house broker has to say after having spoken to the management.

[phillis] 12/2/2014 12:30

Will
Better to focus on trends in operating cash flow
The(improving)business is clearly fundable ( has indeed been funded)

[zipstuck] 12/2/2014 11:52

Of the issues with $ reporting is where costs are incurred. This impacts on margin if $ is weak. Also need to consider what currency contracts are in.

[willessa] 12/2/2014 11:24

$370m bond @ 10% interest = 37m per year.