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Avanti sales rocket

RESULTS: Despite solid progress during the first half, meaningful profits at Avanti Communications are still years away
February 12, 2014

Avanti Communications (AVN) has three expensive satellites orbiting the earth with lots of capacity for sale. It transmitted footage from Nelson Mandela’s funeral and is working at the Winter Olympics in Sochi, but costs were higher than expected during the first half and winning new business is crucial. It is, however, enjoying some success and, if all goes well, should double revenue this year and finally generate a decent cash profit.

IC TIP: Hold at 231p

Forty new contracts were signed in the six months, of which 14 were repeat customers. Chief executive David Williams admits that predicting monthly or quarterly figures is difficult, but believes “capacity will be filled at reasonable prices by 2016”. And those 26 new customers mean utilisation should “spike quite nicely over the next 12 months,” adds Mr Williams. Peak utilisation rates rose to 49 per cent on European satellite Hylas 1 and to 21 per cent on Hylas 2, which covers Africa and the Middle East.

Avanti even made its first cash profit, although the $1m (£600,000) was flattered by a $5.3m payment to settle procurement renegotiation on Hylas 2. But Mr Williams thinks operating costs have peaked, and while a new $370m bond has increased interest costs, less cash will leave the business over the next three years.

Broker Cenkos Securities expects a full-year adjusted pre-tax loss of $58.8m (from $59.8m in 2013, narrowing to $30.3m in 2015).

AVANTI COMMUNICATIONS (AVN)

ORD PRICE:231pMARKET VALUE:£ 258m
TOUCH:229-233p12-MONTH HIGH:335pLow:    135p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:312¢NET DEBT:82%

Half-year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201213.8-25.5-20.4nil
201325.0-41.8-38.7nil
% change+81---
£1=$1.65