By Tom Winnifrith, The Sheriff of AIM | Sunday 28 February 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
If a company organanises itself with complex subsidiaries with opaque accounts that simply contradict themselves you know to run a mile. Think Quindell. Now welcome to the world of Avanti Communications (AVN) - target price 0p - and its wholly owned subsidiary Avanti Communications Infrastructure Limited. The numbers just do not make sense.
The most recently filed accounts are for the year to June 30 2014 and are HERE.
You will note that in both 2014 and 2013 sales and costs were nil. The P&L is thus 0 all the way through. You will however also note that in BOTH years current debtors ( that is amounts owing) are £57, 063599 while current creditors (amounts owed) are £57,483,762. It seems that all sums owed and owing are with other group companies. But what is bizarre is that for an asset or a liability to be termed current it must be due for collection/payment within 12 months.
It is quite clear that this is not the case with the current assets and liabilities of Avanti Communications Infrastructure Ltd. So one wonders:
1, How has a subsidiary that appears to be dormant have built up such a balance sheet?
2. In what sense are any of the assets or liabilities current?
3 To whom and from whom are these contracts with and why?
Well how about we look at another set of accounts. HERE is 2010.
Here we see that once again there were no sales or costs so the P&L is nil although in 2009 there were costs (c£19,000) but no revenue. However in 2010 (despite the business recording absolutely ZERO sales or costs or P&L activity we see that current receivables increased from £46.798 million to £54.514 million. Meanwhile current liabilities increased from £4.718 million to £5.336 million while non current liabilities increased from £42.093 million to £49.190 million. WTF?
1. So how with zero trading activity were there such wild balance sheets swings?
2. How are trade payables which were due in more than one year in 2010 due in less than one year by 2013 but still not paid by 2014?
3. If all those trade receivables and some trade payables were due within one year at June 30 2010, how come they are still marked as current ( ie due within a year) but not paid in 2013 and 2014?
Good, well run companies simply do not leave one asking questions like this. I do not expect Avanti to have an answer or to answer these questions it will simply blather and bluster as normal.
And that is another reason why the shares at 101p are a sell with a target price of ZERO, 0p.
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