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“Challenging” time for Avanti: Sale of assets?

London-based speciality satellite operator Avanti says it is facing “challenging economic” trading prospects, and negative currency fluctuations mean that some of its existing contracts have been reworked. New contract wins during Q4 were a useful $70 million (€63.2m). However, the company failed to update the market with its all-important backlog numbers, although says that its EBITDA (for the full 2016 year) is expected to be $8 million.

Avanti admits that despite a 35 per cent y-o-y increase in revenues for its full financial year (to June 30th 2016) to $83 million, it now has to consider a fresh equity-raising exercise. “Avanti has based its funding plan on cash to be generated from the business which, as commented above, is growing more slowly than expected [and] to satisfy working capital requirements the Company will need to raise at least $50 million of equity.”

It also warned that this current year (ending June 30th 2017) would not meet its previous growth targets.

The company says it is in discussion with a number of “strategic” potential investors, but also warns bluntly that if it is not able either to “secure the above funding or deliver on contingency cost reduction or deferral measures, the Company may not have access to sufficient liquidity to meet its funding requirements through Q2 FY 2017. The Company will keep the market updated as appropriate.”

The news went down like a lead balloon with investors, with its share price crashing 60 per cent (down 36p to just 23.88p and giving the company a market capitalisation of £35.4 million. Avanti has thus lost more than 90 per cent of its value in less than one year.  The business, as at June 30th, had cash-in-hand of just $57 million (down from $122.4 million this time last year).

Equity analysts at investment bank Jefferies say the business might be considering a sale, and that advisors have been appointed.

This could lead to a ‘bargain basement’ asset sale, and where an incoming buyer could renegotiate Avanti’s crushing debt interest payments of 10 per cent to lower rates.

However, there have – over the years – been frequent allegations of poor, and even worse, management at Avanti.

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