Our view: There is without doubt an acknowledgement that Avanti's product delivers the highest quality and flexibility in the market. This can be evidenced by the contract awards with prestigious customers including Telkom SA to provide national high speed broadband coverage across South Africa and in the UK a contract with BT to provide universal high speed national broadband under the Government's Broadband Delivery scheme. The Company's defence business grew strongly with major contracts worth more than 30m. Avanti's growth prospects are supported by both their recent order wins and a very strong pipeline of near term opportunities that are in advanced stages of negotiation. Contract wins were particularly good in the second quarter with new contracts of 40.0m all of which began to invoice by January. The Government and Broadband sectors were strongest and this new business is with large high quality (epeat) customers. Lumpy workflow timing meant that Q2 revenues were slightly lower than planned but all of the contracts that were expected have been signed albeit towards the end of the period or into January and so the Company expect to catch up in the financial year to achieve their target. Importantly Avanti also experienced a high flow of tender requests some of which are large contracts that are close to completion and are therefore expected to impact the current year. The construction of Avanti's key 28GHz HYLAS 4 satellite has progressed in-line with expectations with the launch remaining on-track for the first quarter ending March 2017. The much smaller tactical 4 GHz HYLAS 3 is a hosted payload flying on board a European Space Agency (ESA) satellite for which the ESA is presently declaring a mid-2017 launch. Crucially HYLAS 4 will complete Avanti's coverage of EMEA. This will materially enhance the Group's revenue generation potential largely within the existing fixed cost base. Interestingly the Company expect to announce pre-sales customers for HYLAS 4 during the current financial year. As a result of the advanced status of new satellite procurements Avanti now has greater clarity over capex timing. Capital expenditure for the full financial year 2016 is expected to be in the range of 100m to 110m falling to approximately 70m in financial year 2017. On the basis of the Company's expectation of 50% annual continuing business revenue growth and Avanti's strong liquidity position the Group's business plan is fully funded through to the launches of HYLAS 3 and 4 in 2017 with positive EBITDA expected from the second half of the financial year ending 30 June 2016. Following today's interims we are convinced that the strategy the Company is pursuing is the right one and will reward shareholders. We are not only reassured following a meeting with management today (4th February) that they are totally focused on achieving both their targets and their KPI's but believe the market is undervaluing the value of its spectrum ownership let alone its
company finally got it right ,so much potential ,happy to be buying in at this stage .got it wrong many times on this aim market over the last 3 years like everyone else ,comfortable buying here avanti the future look around you everyone on the phones on the net looking for information africa will follow gla
When you look at all the detail of the first half results the second half should give a much more positive picture with funds flowing in starting to increase. This why the likes of Moodys gave AVN the thumbs up,
Liquidity: management have gone to some length to qualify its solid liquidity position disclosing that: 1. It has untapped credit equal or $71m across "multiple facilities" (we'd expect this to be a mix of vendor financing, finance leases, unused revolve etc); 2. The low point of its business plan should still see it have $90m of cash headroom by FY18 year-end (including the $71m of untapped credit); 3. EBITDA improved in 2Q16 and should turn positive in 2H16 on the back of the aforementioned revenue pick-up and flat costs; and 4. With the passage of time, visibility into capex phasing is now being guided to be $100-110m in FY16 (JEFe, $125m) and $70m in FY17 (JEFe $115m), offering further headroom. Avanti ended 1H16 with $162.6m of cash on the balance sheet.
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