Tuesday, 20 November 2012

Avanti (AVN) ... forecasts going wrong way

This morning, the latest broker forecasts for Avanti’s financials appeared in my inbox. For anyone with access to Bloomberg, they are readily available there. For those that do not have access to Bloomberg, I have put them into some charts below; the broker’s identity remains anonymous.

What is remarkable is the degree to which the forecasts from this broker have changed inside of five months. In July last, the broker confidently projected revenue of £56.5m to June 2013, rising to £102m to June 2014, and £138.2m to June 2015. Now it forecasts (no doubt as confidently) revenue of £34.5m to June 2013, rising to £68.2m in June 2014, and £110.5m to June 2015. Further, whereas back in July the broker projected AVN to report EBITDA to June 2013 of £35.9m, the forecast is now for £11.4m.

In the light of the material change to this broker’s projections for AVN’s financials in less than five months, I reckon the latest P&L projections mean less than nothing. However, what I would pay attention to is the net debt forecast. This has risen substantially. In July, the broker was forecasting net debt to finish at £82.7m to June 2013. This morning it projects net debt to now be £58.2m higher at £140.9m to June 2013. Moreover, five months ago it forecast net debt to June 2014 to fall to £31.2m. This morning’s update sees net debt now being £97.0m higher than that at £128.2m.

Given the direction with which the this broker is adjusting its P&L forecasts while raising its net debt projections, it is probably understandable why I remain short.

On another note, specifically “Note 2. Revenue” on page 48 of Avanti’s recent set of accounts, I would appreciate it if anybody could provide some clarity on my understanding of it. As highlighted below, AVN reported £12,461,000 (2011: £5,462,000) of revenue in 2012. Further, my understanding is that revenues from the European Space Agency (ESA - with whom AVN have received funding) represents 36.1% (2011: 20.6%) of this, or c. £4,498,421 (2011: c. £1,125,172). These figures are remarkably close to those in the final paragraph of note 2, where the group highlights that £4,471,000 (2011: £1,081,000) of its turnover was from European countries outside the UK. Does this mean that apart from the ESA, the group had virtually no revenue attributable to outside the UK during 2011-12? That’s what it looks like to me, but I would welcome others views.


"Note 2. Revenue" from Avanti Communications Annual Report and Accounts for the year ended 30 June 2012
Latest broker revenue forecasts compared to those from July 2012
Source: Bloomberg
Latest broker EBITDA forecasts compared to those from July 2012
Source: Bloomberg
Latest broker net debt forecasts compared to those from July 2012
Source: Bloomberg

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