Investors took fright on seeing Avanti's full-year figures, sending the shares down 15 per cent. The satellite operator's pre-tax losses widened, and revenue, though up, fell short of earlier guidance to the tune of £2.8m. Dig a little deeper, however, and the longer-term picture is not nearly as gloomy.
For one thing, Avanti's HYLAS 2 satellite is now up and running. Targeting emerging markets in Africa and the Middle East with broadband services, the satellite has 22 per cent more capacity than first anticipated as interference precautions (which limit capacity) have not been required after all. "We can now supercharge revenues," says David Williams, chief executive. True, employment costs have risen dramatically as Avanti has taken on new marketing and sales staff to generate HYLAS 2 business. But Mr Williams believes costs will remain broadly flat and new hires can also drum up sales on HYLAS 3, scheduled for launch in 2015, adding: "We have high operational gearing, which means more profit from increased revenue."
With an eye on a full listing, Avanti has adopted more conservative accounting methods. Mr Wiliams says that a move to not immediately booking all the cash it collects in preparing new contracts explains the shortfall in revenue.
Broker Cenkos expects current year adjusted pre-tax losses to rise a third to £20.6m, pencilling in profits of £5.3m in 2014 and £44.5m in 2015.
AVANTI COMMUNICATIONS (AVN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 293p | MARKET VALUE: | £327m | |
| TOUCH: | 292.75-293p | 12-MONTH HIGH: | 445p | LOW: 229p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 242p | NET DEBT: | 36% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 5.92 | -1.36 | -3.6 | nil |
| 2009 | 8.04 | 1.80 | 3.8 | nil |
| 2010 | 5.82 | -1.96 | -3.7 | nil |
| 2011 | 5.46 | -12.7 | -12.1 | nil |
| 2012 | 12.46 | -16.0 | -14.9 | nil |
| % change | +128 | - | - | - |
