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Avanti in trouble again?

April 8, 2019

London-based speciality satellite operator Avanti has again managed to upset its small shareholders by announcing yet another round of borrowing.

It said on March 28th that it was considering options to re-finance its Senior debt (due for repayment in June next year), as well as adding another $225-$250 million to its overall borrowing in order to complete certain capital projects and provide additional working capital.

Quite where the additional revenues will come from to fund this extra obligation is unclear. Avanti stated that its overall capacity revenues for 2018 were just $32 million and this set against the underlying cost of supplying that bandwidth to clients at “around $80 million”.

It has yet to provide the market with actual accounts for last year’s trading. A much-delayed satellite, Hylas-3 will not now orbit until later this year.

This bad, and potentially worse, news hasn’t helped build confidence with smaller investors. Avanti’s share price has crashed 18.75 per cent over the past 13 weeks, 53 per cent over the past 6 months and 81 per cent over the past year.

Avanti’s recent statement to London’s Alternative Investment Market, said: “2018 saw a resetting of the shape of the balance sheet and the strategic direction of the business. With the balance sheet restructuring completed in April 2018, the business refined its strategy to focus on Wholesale, Government and Cellular backhaul opportunities. This bore fruit in the second half of the year with over $100 million of long-term bandwidth contracts signed.

“Bandwidth revenues for the 12 months ended 31 December 2018 are expected to be approximately $32 million. This excludes low margin project and equipment revenues. Bandwidth revenues are forecast to increase by 125 per cent in 2019 and at least a further 40 per cent in 2020. The growth is anticipated to come from Government business on HYLAS 4 and HYLAS 3, once operational.

“Underlying costs of delivering bandwidth is around $80 million. However, the Company has instigated a cost optimisation project, which is expected to reduce the costs associated with bandwidth sales by at least 15 per cent per annum by 2020. These measures should result in a positive EBITDA from the bandwidth business in 2019, with further material growth in 2020.”

At close of trading on April 5th Avanti’s shares were at 2.13p each. Just over a year ago they were at 245p.

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