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Shit sandwich with jam tomorrow on top: trading statement from Avanti Coms - but here's what its hiding

By Tom Winnifrith, The Sheriff of AIM | Tuesday 4 July 2017

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.

Avanti Communications (AVN) has surprised no-one with a grim old trading statement covering the year to June 30th 2016. But the CEO who boasts of how he misled investors with a faked demo to raise funding has - as usual - tried to make a shit sandwich more palatable by serving it covered in oodles of jam tomorrow. But there is something that bombastic prick David Williams is not telling you....

Lets start with the trading statement. We are told that revenues for the fourth quarter rose to in excess of $16 million resulting in total sales for the year of approximately $62 million. As indicated in the Company's Q3 statement announced on 31 May 2017, a number of projects to sell spectrum are progressing well but have not closed in time to impact the final quarter.


Hmmm let's rewind to the last profits warning/trading statement five weeks ago when the bombastic prick Williams insisted that the business is "recovering from the disruption of the first half" when Avanti had to conclude a debt for debt swap - whatever - to postpone going bust and said that in the past two months more than $25 million of new business has been awarded as demand picks up in Europe and Middle East.

In fact H1 sales were $32.3 million. We were told that Q3 sales were $13.9 million and now we know that Q4 sales were $16 million. So in fact Q4 sales were just as abject as those in H1 when there were all those distractions. So what's the excuse this time Williams? Aha delays.

We are also told today that Avanti has won a new 3 year contract worth up to $21 million to deploy several hundred services to government sites across Africa with an existing government customer. This, in addition to recent announcements of Mobility, 5G and broadband orders and a strengthened balance sheet creates a positive outlook for the new financial year.

Hmmm. The phrase "up to" gives a good bit of wriggle room does it not. as for Avanti's confidence and positive outlook well here is what the crony capitalists are not telling you in this RNS. Lets forget sales which are vanity and look at profits which kind of matter.

On page 5 of the 270 page document released yesterday for bondholders it sets out the new EBITDA covenant tests, compared to those that were agreed about 6 months ago. The collapse in expected EBITDA between these two dates is staggering.

In December 2016, AVNs LTM EBITDA covenant at 31 March 2018 was for an expected EBITDA of $37 million. In the new test, it's collapsed to only $1,000 (Yes - that's correct - one thousand dollars). At the other end of the timetable, back in December, the LTM EBITDA for 30 June 2019 was expected to be $116 million. This has now collapsed to only $15 million.

It has had to slash these targets so as to avoid another breach of covenant and default situation. That EBITDA targets are now so incredibly low is devestating. And this is EBITDA or bullshit earnings. We know that I (interest) will be enormous so too will D but so too is capex. What this is telling you is that Avanti is still miles away from generating free cashflow. If indeed it ever does - the ongoing slashing of forecasts suggests that may well never happen.

And while we are now heading towards that day when the first of its satellites ends its working life ( 2023?) the chances of this company actually repaying its debt mountain are just ZERO. that is why the debt is sub junk and the equity, whatever the bombastic prick asserts, is totalloy worthless.

Keep selling. The target price for the shares, now 12.125p, remains 0p.

I wonder about the worst research note of 2016 ( Buy Avanti at 138p - target 427p) from Edison - is it time for an update perhaps? 

Or if you prefer quality analysis our complete coverage of this uber dog is HERE


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