Wednesday 12th February 2014
Avanti has reported its interims this morning. On the basis of the detail provided, I reckon the chances of AVN achieving its FY 2014 consensus forecasts are slim to none.
The group reported $24.961 million in revenue for the half year to 31 December 2013 (Jun year-end); AVN now reports in USD. In old money terms, this is c. £15.620 million of revenue for H1 2014 (the group highlights an average USD:GBP rate of 1.598 for the six months to 31 December 2013). This is 81% YOY growth on its £8.626 million in revenue reported for H1 2013 and 30% HOH growth on its £11.974 million in revenue for H2 2013. Consensus has £48.4 million in revenue pencilled in for FY 2014. This implies that £32.780 million in revenue will be required for H2 2014. That suggests growth of 174% YOY as against H2 2013, or 110% HOH as against H1 2014. I find this prospect extremely unlikely.
|Avanti: Semi-annual revenue and implied H2 2014E revenue from consensus forecast|
Source: Bloomberg consensus and AVN interim and annual reports
Receivables have climbed yet again, to $28.582 million (H1 2013: $22.003 million) and now represent 115% of H1 revenue. Further, I have highlighted prior how poor the quality of these receivables appears to be: receivables looking a bit 50/50. This is somewhat acknowledged by management indicating that collection of receivables was “... also slightly slower than expected collections from some customers who are growing, and to whom we give credit terms rather than price reductions.”
|Avanti's percentage of trade receivables either impaired or 60+ days past due|
Source: Annual reports
Inventories also rose during the period.
It would appear that while the group was still majorly loss making, that the losses would have been far worse were it not for a one-off gain of $5.342 million from “a commercial settlement in relation to the Hylas 2 procurement” as well as $463,000 in currency gains on receivables and working capital.
The interest cash cost on its recent bond instrument was a whopping $9.250 million in H1 2014.
It is unclear to me whether the backlog grew in constant currency terms or due to the translation into USD. The group reports that “Backlog grew to $455m” during H1 2014 to 31 December 2013. Backlog was prior reported to be £290 million as at 30 June 2013. On the basis that the group states a period end USD:GBP rate of 1.657 to 31 December 2013, then the $455m in backlog equates to £275 million, i.e. down from £290 million reported prior. On the basis that the group states an average USD:GBP rate of 1.598 in the six months to 31 December 2013, then the $455m in backlog equates to £285 million in backlog. Either way, it appears to me that the backlog actually fell. I would welcome it if anyone can provide some clarity on this.
I remain short.
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