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Avanti “burning through cash”

London-based specialist satellite operator Avanti saw its shares fall in value some 13.4 per cent on February 4th following the release of its half-year results.

Avanti reported a narrowed pre-tax loss for its first half, and guided for 50 per cent revenue growth from its continuing business at constant currency for its full year. Avanti does all its business in US dollars. For the half year to end-December, the satellite data communications company reported a pre-tax loss of $45.5 million, narrowed from a pretax loss of $48 million a year before, as a slight decline in revenue to $31 million from $31.1 million was offset by lower cost of sales.

Fleet utilisation grew “into the 25-30% range” during Q2, stated the company (and up from 20-25 per cent in the previous quarter year).  Avanti says its contracted backlog grew from $379.7 million at the beginning of Q2 to $409.6 million at the end of the quarter.

Avanti said revenue was hurt by the strength of the dollar against sterling and the euro, and on an adjusted basis revenue, underlying revenue rose 18 per cent in the half year, helped by strong contract wins. The company said it had won $40 million in new contracts, mainly with government and large telecoms customers, in Q2.

Shares in Avanti crashed 13.4 per cent to 119.00 pence Feb 4, having initially risen to 148.00p on the February 4th news despite some strong investment bank recommendations. For example, bankers Jefferies rated the company a ‘BUY’ and with a target of 285p.

However, other comments made following the results suggest Avanti is “burning through cash” (mostly on interest payments on its $627 million of high-interest bonds) at a much faster rate than it is growing its business. During the past 6 months (to December 31st) Avanti suffered a cash outflow of $82.3 million. At this rate the company will be out of cash in barely two years, unless – of course – it raises new money.

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