Having had a bit more time today to think through the implications of the inclusion of Hylas 4 in the figures ( a presently non-existent satellite which might or might not get into orbit around 2017) I think the thing that has spooked me is that it appears to be another example of "hype". This is a company that for better or worse has been caught out in the past and there are clearly those who are nursing big losses who with some justification look hard at anything that is now put on the table by the management. My concern is that Hylas 4 is so big in terms of capacity that it really skews the figures (18GHZ to 46 GHZ) so is the reason for its inclusion that they don't work or at very least don't show real traction on the market without it? I've got just over a week away now so I will have an opportunity to go through the figures again carefully to see what the situation is with and without Hylas 4 ~ I hope I'm wrong but I really cannot fathom why Hylas 4 was included and I fear my gut reaction that it is window dressing because the business is mediocre without it may be only too right. I'll post my figures when I get back for you to scrutinise.
Space is big business & big investment. From the RNS ' It will take perhaps another three years for those contracts to fully saturate our in orbit capacities, but at that point we would risk becoming an ex-growth business unless we build further capacity. One of the challenges of the space business is that it takes three to four years to design, build, launch and commission a new satellite, so it is important that we continue to look far ahead. Current rates of repeat business and new customer acquisition suggest that by 2017 there is a realistic probability that existing capacities will be substantially full. The relatively small HYLAS 3 payload we are flying on an ESA satellite gives us some ability to expand, but without expansion capacity across territories, there is a risk that the business at that point would be waiting several years for its next major growth inflection. We also need to assure our customers of continuity and security of service over the longer term.' AVN could scrape Hylas 4, the £300M saving would bring profit quickly but short lived and is clearly not the BOD's intention. I'd agree with Jeffoto your time scales do seem pessimistic but would also be interested in your rationale. ATB
I find it hard to agree with your pessimistic view of Avanti's future, break even in 10 to 15 years sounds unduly harsh a view. Given Avanti has bandwidth for up to 20 satellites, I expect that in 10 to 15 years we would have additional satellites, possibly as many as 8 plus, on the basis that it seems that Avanti are looking to launch a new satellite ever two years or so. I very much doubt that the BOD plus the major investors, heavily invested, think that it will take 10 to 15 years for break even to be reached.
Perhaps you would be able to explain your calculation?
I have to concede that hpj.tankersmith is right. This morning I had confirmation from the company that Hylas 4 is included in the term "current fleet". To say that I am astounded that a satellite that has not even be built is included is an understatement. If this is the standard usage in the industry I'm not at all sure I want to be invested ~ it's Mickey Mouse accounting and pushes my view of break even on the fleet AVN does have far into the distant future... maybe 10 or even 15 years. Not good news at all.
"Financial terms were not disclosed, but Arianespace chief executive Stephane Israel has said the company had lowered its prices for smaller payloads to be launched on the Ariane 5 rocket after pressure from SpaceX, which promotes its prices on its website. "
Sorry got sums wrong earlier $500m on 18GHz would be $27,800 per MHz per year which is about $2,300 per MHz per month. But the $500m quoted was EBITDA and my calculation is probably gross margin so you may also need to consider operating costs.
I am trying to tie back the fleet capacity and revenue guidance. Looking back I think we have 3GHz for Hy. 1, 11 GHz for Hy 2 (upgraded from 9GHz post launch) and 4GHz from Hy 3, plus whatever we get from Artemis short term. So at least 18 GHz. Would average margin of $2,800 per MHz give you the target margin of $500m. Hylas 4 adds another 28GHz so I think they must be talking about the existing fleet before Hy 4 is included
I am grateful for the education about practices in the marine world... but does it apply here? The implications both in the potential revenue stream and its timing (2017 and well beyond) are very profound. I've sent a note to the company to seek clarification of whether Hylas 4 is in or out of their figures and I'll let you know the result.
I take an opposing view on the meaning of 'current fleet' , in the marine shipping world it would be normal to refer to a fleet of 12 ships , although only 6 are on the water , 3 to be delivered in 2015 and 3 to be delivered in 2016. On the Avanti website their current fleet list includes Hylas 1-4 and Artemis i.e. all built AND contracted for units.
I noticed on another Discussion Group a message from somebody who was having trouble with the potential turnover and margins mentioned in the recent statement. My starting point is the fact that these RNS statements are carefully written and are crawled over by lawyers; they mean no more and no less than they say.
So when they refer to "a business that can potentially generate over $700 million in revenues and over $500 million EBITDA annually if the current fleet is filled" they mean exactly that ie Hylas 4 is excluded as it does not presently exist and nor do most of its costs. What they will take into account are all of the costs already incurred that, if they have been capitalised, need to be written off over the useful life of the asset eg base stations. What we don't know as investors is what the true margins are on any contract. We do now know that the target is $2000 per MHz per month and that this is being achieved overall BUT we don't know how that relates to costs incurred or to individual contracts. Elsewhere I have observed that for Ka band providers it is the utilisation of each band that is critical as some can be sold out when others are empty. In that respect AVN is very similar to fashion retailers: it doesn't matter a jot if you sell 30% of your stock at premium prices, its what you move the rest at that sorts out the men from the boys as the 70% can reduce or eliminate your profits.
As AVN gets bigger and less vulnerable (to major contracts, equipment failure, one off capital costs etc) they will provide us with more information prepared on a consistent basis - it's in their own interests to do so. While they are currently beset by short sellers I can understand why they are reticent to divulge anything more than they have to as almost anything is turned into a speculative frenzy.
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