Avanti Communications is a London-based satellite operator supplying capacity (mainly) for broadband-by-satellite services. In August it launched its second satellite, Hylas-2, itself the topic of some negative publicity. But the stock market has quite definitely fallen out of favour with the company.
Not helping are poor results, well below market expectations and the company’s own guidance. The market was expecting full year revenues of a modest £18 million, and the company delivered just £15 million (although this was more than double the previous year’s revenues) during its preliminary results announcement (for the year to June 30th). As a consequence the upcoming year is now being marked down as far as the company’s expectations are concerned and – as CEO David Williams stated – more accurately reflecting Avantri’s “increasingly conservative accounting”. His end of year report also said that some customers had not met their own sales targets, and were committing to shorter two-year contracts instead of 5 year contracts.
Avanti’s losses widened from £12.7 million to £16 million. The company’s contract backlog, a measure of forward-order bookings, grew significantly to £268 million (up 57 percent).
The news from Avanti went down like a falling satellite. “Three…two….one….letdown” was how the influential Investors Chronicle newspaper put the company’s woes.
The news compounded a miserable week for the operator. Oct 11 saw the company’s share price fall like a cliff, from 360p to below 300p. The price fall means the company’s stock has fallen from a 52-week ‘high’ of 419p, and a position back in 2011 when they were well over 700p a share. The directors stepped in on Oct 11 and bought heavily at what they may consider to be ‘bargain basement’ prices. But still the negative slide continues, with early trading on Oct 12 seeing further falls to 277p (and at one stage 270p). David Williams bought 8,100 shares at 305p a pop, while another director, David Bestwick, bought 16,200 shares at the same price. “We’ve been filling our boots, you might say,” Williams told Sharecast.
The operator admits, not unreasonably, that many of its contracts are “more back-ended than expected [and] existing satellites are expected to be full at current run rate in 2016”.
However, negative publicity continues to hound the company’s plans for Hylas-2, now declared operational at 31 degrees East, and with 11 gigahertz of rentable capacity. The government of Luxembourg is still objecting to Avanti’s use of the 31 degrees East slot and has reportedly asked the ITU in Geneva to arbitrate in a dispute with SES as to which operator has superior rights to use the Ka-band capacity at the location.