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Avanti’s Hylas 2 is a geostationary High throughput satellite built by Orbital Science Corporation. It was launched on an Arianespace Ariane 5 rocket from Guyana Space Centre at Kourou, French Guyana, on August 2, 2012.
Image credit: Orbital
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[Satellite TODAY 07-10-13] Avanti Communications, the U.K. based satellite operator, has issued a trading update, which indicates revenues for 2013 have fallen “below expectations” as of the end of June 2013. The company said that revenue guidance for the period included the value of several major contracts in Africa that were expected to close before the end of June this year, but are now expected to be completed in the next financial year.
Eric Beaudet, a satellite equity analyst at Natixis Securities, said the trading statement contained both positive and negative elements.
“Overall, the results are below expectations for FY 2013 and this will most likely weigh on the stock today. Full year sales are well below estimates. These could come almost 10 million pounds ($14.90 million) below market consensus – 32 million pounds ($47.68 million) due to delays as the revenue from a big contract that was signed during the year is no longer assured. This contract – and the attached revenue – is now expected to close in FY 2014,” he said in a research note.
However, there were still positive elements to the story. “Backlog gives confidence in the future. In order to reassure on its prospects, Avanti gave for the first time gave a detailed view of its backlog, 42 million pounds ($62.58 million) for 2014, 46 million pounds ($68.54 million) for 2015, 40 million pounds ($59.60 million) for 2016, which is a minimum,” Beaudet added.
Avanti is set for a busy 12 months. “[Over the next year], a new contract will be added. Secondly, three large contracts are currently under negotiation. Thirdly, contract renewals will be signed and some contracts may be extended. In the end, Avanti therefore reiterates its ambition to reach 610 million pounds ($908.61 million) in sales as soon as June 2014. Nevertheless, recall that this amount of backlog is sufficient to guarantee a positive FCF as group has operating expenditure of approximately30 million pounds ($44.70 million),” Beaudet said.
And Beaudet still retains a bullish outlook on the stock. “The stock should be down today but our investment case on Avanti remains intact. Firstly, the company has just passed break-even and doubled its sales year-on-year, even though this is less than what was targeted. Secondly, we see a big end user market as there are more than 50 million households without any terrestrial broadband solutions in Europe, Middle East & Africa, and total capacity is less than three million total in the industry,” he said.
Avanti also revealed that there were many causes for optimism. It called recent sales progress “encouraging,” and pointed to signing contracts with major telecoms and media companies including Vodafone, Technicolor and CNN. It has also gained significant traction in the VSAT market and has signed new contracts in the year with Speedcast, TTcomm and Bentley Walker among others.
The company is one of the ambitious new operators in the satellite sector, and the launch of its Hylas 1 and Hylas 2 satellites were some of its key milestones. In an interview with Via Satellite almost two years ago, David Williams, Avanti’s CEO, said the operator had highly ambitious plans. “I would say in the next 10 years, there is a very good chance that Avanti could deploy at least half a dozen additional satellites. If we do that successfully, there is no reason why Avanti cannot become one of the most significant public companies in London,” he said.
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