Avanti Shares Tumble On Sluggish Sales Despite Growth Promises
February 04 2016 - 9:20AM
Dow Jones News
(Rewrites first paragraph, adds additional information.)
By Olga Cotaga
LONDON--Shares of Avanti Communications Group PLC (AVN.LN) fell
as much as 11% Thursday after investors gave short shrift to the
company's bullish revenue forecast after reporting a slightly
narrower half-year pretax loss on disappointing second-quarter
revenue growth.
Avanti reported a pretax loss of $45.5 million in the six months
to end-December compared with a loss of $48 million for the same
period last year, as revenue fell slightly to $31 million from
$31.1 million.
Fiscal second-quarter revenue was 28% higher than in the first
quarter, but still lower than what the company was expecting.
Avanti repeated that it expects 50% growth in continuing revenue
in its current fiscal year, on a constant-currency basis,
underpinned by "substantial" recent orders.
The provider of satellite data-communications services in
Europe, the Middle East and Africa recorded $40 million of new
contracts during its fiscal second quarter, mainly with government
and large telecoms customers. It expects this to make a strong
revenue contribution in the second half of the year.
"Investors took the news with a pinch of salt," said Eric
Beaudet, analyst at banking group Natixis, noting that over the
past three years the company "overpromised, but
underdelivered".
Natixis's Mr. Beaudet said that he believes in the long-term
potential of the company, but the problem is in its short-term
performance. The market will react differently once the company
starts delivering two consecutive quarters of good results in line
with previous expectations, Mr. Beaudet said.
Avanti shares at 1220 GMT had dropped 13.25 pence, or 9.6%, to
124.75 pence a share, after falling as low as 122.5 pence earlier
in the session. They are currently down 45% over the past 12
months.
"Avanti is strongly capitalized with more than adequate cash
headroom. In a pioneering market, the combination of a good
product, good customers and a fully funded model assures us that
Avanti has a successful trajectory ahead," said Chief Executive
Officer David Williams.
Avanti's optimism looks warranted, said analysts at investment
bank Jeffries. Assuming revenue from the recent contract wins is
recognized over one and a half years, the $13 million in
incremental revenue expected for the second half of this year "goes
a long way to validate the reiterated guidance."
The bank kept its price target for the company at 285 pence per
share and has a buy rating on the stock.
Write to Olga Cotaga at olga.cotaga@wsj.com, Twitter
@OlgaCotaga
(END) Dow Jones Newswires
February 04, 2016 09:05 ET (14:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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