Avanti Communications Group — Update 2 March 2017

Avanti Communications Group — Update 2 March 2017

Avanti Communications Group

Andy Chambers

Written by

Andy Chambers

Director, Industrials

Avanti Communications

Preparing for launch

H117 results/reinstated estimates

Fixed satellite services

2 March 2017

Price

16.38p

Market cap

£27m

US$1.23=£1

Net debt ($m) at 30 June 2016

588.9

Shares in issue

162.1m

Free float

100%

Code

AVN

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(18.6)

(28.0)

(83.9)

Rel (local)

(21.7)

(34.1)

(86.4)

52-week high/low

109.8p

16.4p

Business description

Avanti Communications is a London-based fixed satellite services provider. It sells satellite data communications services to service providers in its key markets of enterprise, broadband, carrier services and government. It has Ka-band capacity on four satellites, with two launches due in 2017.

Next events

Q3 trading update

May 2017

Analysts

Andy Chambers

+44 (0)20 3681 2525

Roger Johnston

+44 (0)20 3077 5722

Avanti Communications is a research client of Edison Investment Research Limited

Following the success of the consent solicitation announced on 6 January, Avanti’s refinancing is now complete. The company can pursue the strategic development of its satellite network, increasing revenue and cash flow potential. While lower guidance and the refinancing dilute previous cash equity valuations, a significant opportunity for shareholder value creation remains. Our reinstated and revised forecasts produce a current DCF-based fair value standing at 109p per share.

Year end

Revenue ($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/15

85.2

(73.3)

(61.4)

0.0

N/A

N/A

06/16

82.8

(67.0)

(49.3)

0.0

N/A

N/A

06/17e

84.2

(85.9)

(55.6)

0.0

N/A

N/A

06/18e

127.4

(92.5)

(56.7)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Funding facilitates model development

The completion of the bond refinancing on 27 January 2017 enables the company to pursue its business model. A better outcome than some had surmised, this also retains potential for longer-term equity value creation for investors from much depressed levels. The $242m of new liquidity will allow the two new Ka-band satellites, HYLAS 3 and HYLAS 4, to be completed, launched and entered into commercial service barring any technical hitches. As capital spending declines, cash flow should increase to service the higher interest costs and ultimately generate cash for equity investors. While the lengthy strategic review and formal sales process compounded uncertainty and inhibited new business wins, customer confidence should now return, reversing this trend.

Reduced targets and guidance

Alongside the new funding arrangements, Avanti updated its key medium-term performance targets and expectations. It now guides towards lower revenue growth of 35-40% due to slower fill of existing satellite capacity and pricing pressure. FY17 continues to reflect the negative impact on business development of uncertainty surrounding the company’s future during H117, as reflected by results. The revenue decline incorporates revised price expectations. Management no longer adheres to the mantra of maintaining pricing levels at $2,000 per MHz per month, recognising the reality of significant price pressure across the satellite bandwidths, with an expectation that the average selling price could fall as low as $1,450 by FY19.

Valuation: Slower fill but opportunity persists

Reduced sales, earnings and cash generation, combined with the dilutive impact of the refinancing significantly impair previous equity valuations. Nevertheless, the basis for optimism should be provided by progression from current fill levels combined with new capacity additions, a largely fixed operational cost base, the doubling of revenue capacity when HYLAS 4 is launched and a lower cash burn as capex falls. Our DCF-based fair equity value is 109p, highly geared to sales growth.

Refinancing completed

Avanti announced the success of the consent solicitation process on 6 January 2017, with over 90% of the bondholders having accepted the improved terms offered to them. The complex refinancing completed on 27 January and the package provides the company with $242m of additional funding headroom. It allows Avanti to continue its strategic build of a satellite network and related infrastructure. With capex and working capital requirements now covered, the two satellites due to be launched later this year can be completed. HYLAS 4 is a high throughput Ka-band satellite costing around $300m with over 28GHz of capacity that will more than double Avanti’s revenue potential and is now expected to be launched in Q317. HYLAS 3 is a smaller, 4GHz Ka-band package likely to be launched on the European Space Agency’s (ESA) EDRS-C satellite later in 2017 although this is not yet certain.

The refinancing structure is summarised below:

Exhibit 1: Financing structure - bonds in issue ($m)

Prior to refinancing

Post refinancing

Super Senior Debt option

Prior to PIK

Post all PIK

Prior to PIK

Post all PIK

Existing
10% 2019 Notes

685

Amended Existing
12% 2023 Notes

497

581

497

581

Accrued interest

23

PIK Toggle
10% 2021 Notes

Exchanged

211

227

211

227

New Money (drawn)

83

89

New Money (delayed draw)

50

50

Super Senior Debt (say 7%)

133

133

Total bonds in issue

685

841

947

841

940

Average interest rate

10.00%

11.18%

11.23%

10.71%

10.81%

Cash interest

69

94.0

106.3

90.0

101.7

Source: Company reports, Edison Investment Research estimates. Note: PIK is payment in kind.

Interest accrued on the existing bonds before the refinancing completed of c $23m is effectively converted into additional bonds at par, so the effective nominal restructured is $708m.

We discuss the refinancing package in more detail at the end of the note, but the main elements affecting equity investors are:

New funding of $130m ($132.5m before a 3% discount on $82.5m) in the form of 10% 2021 PIK Toggle Notes (which could be substituted wholly or in part by a Super Senior Debt issue).

Potential to defer $112m of bond cash interest payments through a PIK (payment in kind) mechanism on the next three payment dates. Avanti can pay all of the interest due in April and October 2017 on all of the bonds using a PIK mechanism, subject to a minimum liquidity test. The April 2018 interest payment on the 12% 2023 Amended Existing Notes element can also use a PIK. The PIK rates are 17.5% for the Amended Existing Notes and 15% for the PIK Toggle Notes. If all elements of the PIK mechanism are executed, gross bonds in issue would rise to $947m nominal.

An increase of bonds in issue on completion to $841m ($50m subject to a delayed draw: $15m in June and $35m in November). The cash interest rate on the Amended Existing Notes element is 12%, 200bps higher than on the existing bonds, and the PIK Toggle Notes pay 10%.

Potential for a Super Senior Debt issue that would be at more favourable terms than the $132.5m of new money 2021 10% PIK Toggle Notes it would replace.

Bondholders who participate in the New Money Offer also receive a pro rata share of a 14.7m share issue at nominal value, which represents 9.09% of the enlarged share capital. This is the only direct element of equity dilution in the refinancing.

Following the refinancing the Avanti board has been restructured and the bondholders will be given representation on the board via the nomination of three directors and the selection of two non-executive directors. The existing Chairman, CEO and CTO are retained and a new non-executive director, Richard Mastoloni was announced alongside the refinancing proposal. He was previously involved as an NED in the successful refinancing of Satelites de Mexicanos.

Value transfer

In terms of the net present value (NPV) of future cash flows transferred to bondholders from equity holders, this is summarised in Exhibit 2. We assume all PIK opportunities are utilised. We estimate it as $278.6m made up of incremental interest payments and additional bond redemptions. This is partially offset by the benefit from the deferral of the existing $708m bond redemption from October 2019 to October 2023 of $186m, which leaves the NPV transferred to bondholders at $92.3m.

Exhibit 2: NPV transferred to bondholders by refinancing

Year end June ($m)

FY17e

FY18e

FY19e

FY20e

FY21e

FY22e

FY23e

FY24e

Interest curtailed

-32.94

-69

0

Additional cash interest paid

25.2

76.8

94.0

94.0

94.0

23.5

Existing bond redemption

-708.0

708.0

Additional bond redemptions

139.2

99.8

Cash adjustments

-32.9

-68.8

25.2

-631.2

94.0

233.2

94.0

831.3

Discount factor

0.96

0.86

0.77

0.69

0.62

0.56

0.50

0.49

Discounted cash adjustments

-31.5

-59.0

19.4

-478.5

58.4

130.4

47.2

407.0

NPV

92.3

Number of shares in issue (m)

162

Value per share ($)

0.57

$/£

1.25

Value per share (£)

0.46

Source: Edison Investment Research estimates

H117 results

The uncertainty caused by the strategic review during the first half of FY17 was reflected in performance. The highlights of the first half results released on 28 February are shown below:

Exhibit 3: Avanti Communications H117 key figures

6 months to Dec ($m)

2015

2016

% Change

Revenues

31.0

32.3

4.2%

EBITDA

-3.8

-6.3

65.8%

Operating loss

-28.9

-27.9

-3.5%

Loss before tax

-62.6

-45.5

-27.3%

Jun-16

Dec-16

Gross cash

56.4

14.4

-74.5%

Borrowings

-645.3

-674.0

4.4%

Net debt

-588.9

-659.6

12.0%

Source: Company report

The H117 results were released on 28 February and confirmed previous management comments. While revenue growth was limited there was a significant currency headwind. On a constant currency basis the improvement would have been 11.9%. Cost of sales remained reasonably consistent with H216, although higher than H116 due to increased kit costs and subcontract costs on government contracts. FX reduced employee costs (which are largely in sterling) enhancing the cost control measures. This widened the EBITDA loss and loss before tax.

The refinancing also increases gross cash balances to $62m as of February 2017 following the receipt of the bond issue receipts, partially offset by capex on HYLAS 4.

HYLAS 2-B was operational for only a few weeks during H117 and will add a more significant contribution in H217, albeit at a lower level of utilisation than the current satellites. Management also notes an apparent improvement in pipeline conversion since the refinancing was announced.

Guidance from the company reflects the anticipated improvements in satellite fill rates as well as the addition of new capacities and the ramp up of framework contracts. The improvement should start to be reflected in improved H217 revenues. The implied momentum combined with the overall depressed nature of FY17 sales due to the now alleviated uncertainty, we feel should mean the medium-term 35-40% sales growth target may be exceeded in FY18. We assume a successful launch of HYLAS 4 which should make an incremental initial contribution in H218, and HYLAS 2-B should increase its fill rate and will make a full year contribution.

Progression will be supported by a number of major contract wins, many of which are framework agreements not represented in the current order backlog.

Key contract wins

EE continues to widely promote Avanti’s technology being supplied in the $29m contract supporting the extension of coverage for the mobile element of the UK’s Emergency Service Network. It is the world’s largest 4G mobile satellite backhaul contract that includes over 1,000 towers and first responder vehicles. Further to this success Avanti has continued to announce further key contract wins in the current financial year, especially in the carrier services and government segments.

Also in Carrier, Avanti has contracts now to deploy 2,500 satellite backhauled wi-fi hotspots in Africa in its Every Child Online project.  This is expected to grow to tens of thousands of sites, and could provide an interesting revenue model for Avanti through the products ability to deliver revenue directly from the end consumer to Avanti through an automated payment portal already roll out ins Kenya and Tanzania

Every Child Online (ECO) – a project in cooperation with the European Space Agency (ESA) which is providing €10.7m of funding to provide subsidised broadband access to 1,400 sub-sites in rural communities across sub-Saharan Africa over the next two years. Servicing local businesses and consumers, an initial 2,500 solar powered hotspots will be hosted by HYLAS 4 when it becomes operational. With many African partners signing Memorandums of Understanding, the deal could extend to tens of thousands of hotspots.

Telkom Kenya - a multi-million dollar government contract to provide connectivity for 1160 incubation hub facilities for young adults and entrepreneurs This adds to Avanti’s existing contracts connecting government offices in South Africa, Zimbabwe and Tanzania which has proven to be quite a good stream of business. It shows that governments in Africa continue to adopt satellite solutions.

Eurona – after signing 10 year contract in Q416 for exclusive use of Iberian peninsula capacity on HYLAS 1, the company announced the service launch in January 2017. The broadband contract arose from the sale by Eutelsat of its Ka band satellite. With an estimated value of €30m over its life the Eurona contract is the largest migration so far, but others may follow suit.

Reduced operational guidance

Following the refinancing agreement, Avanti has provided a revised series of performance indicators for the medium term, which have significant impact on forecast revenues, earnings and cash flows. The main elements of revised guidance are:

Reduced growth expectations: medium-term recurring revenue growth of 35-40% pa (50% previously) is now expected. In our view, it remains plausible that this could be exceeded once HYLAS 4 is commissioned although we now utilise the lower growth levels in our valuation.

Slower capacity fill rates: utilisation in Q4 2016 was in the 25-30% range for the existing fleet, but will rise to the 35-40% range by the end of FY18 as already contracted revenues ramp up on HYLAS 1 and 2. HYLAS 4 is expected to reach the 25-30% fill level by the end of FY19, with average utilisation across the entire expanded satellite network in the 25-30% range over the next 2-3 years.

Price pressures: management has indicated that it no longer expects to maintain the previously targeted $2,000 per MHz per month pricing level. The company says average yield on the current fleet in Q416 was in the $1,600-$1,700 per MHz range and had fallen by a further $100 per MHz in Q117. It now expects average pricing to fall to around $1,500 per MHz per month by the end of the current year; and

Operating costs stable: at around the $75m seen in FY16.

It should be noted that management has indicated options for HYLAS 3 are being considered as the launch has already been severely delayed. HYLAS 3 is a 4GHz payload package on the larger ESA EDRS 2-C satellite, and while launch is still slated for later this year, it is not certain due to issues on the main satellite. The HYLAS 2-B capacity essentially compensated Avanti’s model for the absence of the capacity from HYLAS 3, and we suspect the options being considered may include a sale of the entire package or negotiation of spectrum rights usage by third parties.

Valuation reflects deferred cash expectations

Essentially the Avanti model is unchanged, although the funding structure has altered significantly. As previously, the focus for management following the refinancing has to be on completing the network now funding is in place and filling capacity in order to grow revenues against the predominantly fixed cost operating cost base. The increase in free cash flow that the growing revenue should generate will coincide with the sharp fall in capex once the new satellites are launched. However, the interest burden increases substantially, deferring free cash flow break even, which is further delayed by the reduced revenue growth expectations. With 10% more shares in issue, unsurprisingly equity valuation estimates are reduced, with increased gearing to future cash generation performance.

We continue to believe that a DCF methodology is appropriate for Avanti’s business model, although the revised terms of the high interest bonds and the PIK process are clearly dilutive factors for equity valuations.

We have revised our DCF to reflect only the existing (HYLAS 1, HYLAS 2 and HYLAS 2-B) and planned satellite capacities (HYLAS 3 & 4). However, we are now assuming no revenues from the HYLAS 3 package, although this should provide some value for shareholders so we have incorporated an estimated cost of construction value of $60m, although the current insurance value would include launch costs increasing the value to around $90-100m.

We have also adjusted terminal cash flow for the finite lives of HYLAS 1 and HYLAS 2 at fifteen years by eliminating their revenue contributions from the terminal value. Again, the contraction of the DCF to more closely reflect the finite service of the existing fleet life represents a cautious view of the longer-term potential for business development. It remains entirely plausible that Avanti will extend its network further in the future, replacing existing satellites with higher capacity models, providing an increase in terminal value.

Due to the very low equity valuation the calculated WACC of 11.3% is close to the weighted average coupon of the gross debt. Our DCF calculated on the above basis returns a value of 109p per share. The reduction of value compared to our previous values is made up of four elements: transfer of value to the bondholders (overstated in our DCF by the assumption all debt is immediately redeemable), 10% increase in share count, lower revenue guidance, and the curtailment of the DCF to existing and immediately planned fleet. The sensitivity of our DCF to WACC and terminal growth is shown in the table below, with the closest value to our WACC assumption highlighted.

Exhibit 3: Avanti Communications DCF (p) sensitivity to WACC and terminal growth

WACC

8%

9%

10%

11%

12%

13%

14%

15%

Terminal growth rate

0%

275

219

168

123

82

44

10

-20

1%

318

252

195

144

99

59

23

-10

2%

376

296

229

171

121

76

37

2

3%

456

354

272

204

147

97

54

15

4%

577

435

330

247

179

122

74

31

Source: Edison Investment Research estimates

Risk diminished not eliminated

The risks to the equity valuation remain broadly similar to those indicated a year ago, although clearly the increased role of the bondholders and lower forecasts remove significant value potential for equity holders. The refinancing largely removes an element of risk related to the financing of the build out of the space network, but the risk from slower than expected commercial development remains. Issues such as a technical or catastrophic failure are largely covered by insurance.

In respect of the bond refinancing Avanti is subject to a soft covenant for the duration of FY18. We suspect this relates to commercial performance, which could lead to further equity value diminution.

Financials

We have altered our revenue assumptions to reflect management’s guidance for lower revenues, with lower pricing expectation the largest element of adjustment. We now assume an average price of $1,450 per MHz per month in FY18 compared to $2,000 per MHz per month previously. In addition, we now assume no sales from HYLAS 3 once deployed.

We have assumed that the current year has been severely disrupted by the uncertainty surrounding the company’s financial structure and the negative impact of FX on European and UK revenues. Our revenue estimates reflect only a modest improvement in recurring revenues, which should start to accelerate as framework contract capacity builds over the next 18 months, filling existing capacity to levels previously anticipated for this June. HYLAS2-B should also make an increasing contribution. Further, we expect HYLAS 4 to start making revenue contributions from October 2017 and as this major capacity addition fills progressively, significantly boosting revenues.

There is some moderate cost base benefit resulting from a weaker sterling. For example most employment costs are sterling based, although the existing belief that excluding depreciation the cost base should remain relatively fixed remains.

The biggest change comes in interest where the face of the P&L has to show the interest rate related to the PIK of both FY17 and FY18 bond interest, even though this is a non cash item in the year of the PIK. In the cash flow it is adjusted out of free cash flow and into debt creation. Thus our balance sheet includes all the possible elements of PIK interest being undertaken, which we regard as being the worst case. We have not assumed a more favourable Super Senior Debt issue although this is clearly under consideration.

Refinancing package

The Strategic Review and coincident Formal Sale Process started in July were both concluded by the announcement on 9 December 2016 of the proposed major restructuring of the group’s bond debt. During the review period, five offers for the company were received from commercial entities and private equity investors, but all indications of interest were rejected as failing to fully recognise the potential at Avanti. The announcement of the proposed deal with bondholders to refinance the company was announced on 20 December 2016, with the success of the consent solicitation process (approval) announced on 6 January 2017. The refinancing was completed on 27 January 2017. Despite the improved terms for bondholders, we would regard the deal as a vote of confidence from them in Avanti’s revised prospects given the recourse they have to the installed value of the space assets and associated ground infrastructure in case of default.

Unsurprisingly, the prospects for equity holders are diluted by the deal. While the issuance of new equity to bondholders as part of the refinancing is limited to just 9% of the increased share capital, the cash being diverted to the bondholders increases significantly. This is further compounded by the reduced sales and earnings expectations growth, which are likely to defer post interest cash generation by several years.

Nevertheless, the ability to continue to develop the satellite network and thus revenue potential remains in place, albeit likely returns are diminished and delayed.

Much needed liquidity provided

There are two elements of improved medium-term liquidity for Avanti. A New Money Offer will provide $130m of cash, and deferral of interest payments totalling $112m will provide the balance.

Bond restructuring and New Money Offer

The existing 2019 bonds, including those issued as a result of the PIK of the October 2016 interest payment total $685m, with a further $23m of interest accruing until 27 January 2017, the date of completion of the refinancing. This provides total of $708m nominal of Existing Notes that are subject to the refinancing.

The main Bond restructuring elements

New cash funding of $130m will be provided via the issue of $132.5m nominal of further 10% 2021 PIK Toggle Notes (the New Money Offer). $80m will be provided on completion (at a 3% discount). The remaining $50m of delayed draw notes will be drawn in a $15m tranche in June 2017 and the balancing $35m in November 2017. The new funding will be used to support capital expenditure, completing HYLAS 3 and HYLAS 4 ready for launch.

The $130m of new money is fully underwritten by bondholders holding 73% of the Existing Notes, which will also entitle them to a pro rata share of an equity issue of 9.09% of the enlarged share capital of Avanti (current value of c £3.1m). Other bondholders can participate on the same basis if they so choose via the New Money Offer.

The Existing Notes with a value of $685m will be amended, with the coupon rising from 10% to 12%, and with $204m of nominal being exchanged for PIK Toggle Notes with a nominal value of $204m, and a cash interest coupon of 10%. The maturity of the 12% Amended Existing Notes with nominal value of $497m is extended to 2023 from 2019 for the Existing Notes.

The $23m accrued interest on the Existing Notes since the October 2016 payment is being effectively pre-PIKed and converted to notes, which will be split pro rata between the Amended Existing Notes ($16m nominal) and the PIK Toggle Notes ($7m).

The agreement permits Avanti management to raise Super Senior Debt up to a value of $132.5m. The expectation is that such a facility would likely incur interest at a much more favourable rate than the PIK notes. It would be used to repay the New Money Offer PIK Toggle Notes subject to make whole terms and refinancing charges.

Following the successful consent solicitation that provided the necessary permissions to proceed, Avanti has now completed the New Money Offer, including the issue of the 14.7m new shares.

Additional liquidity provided by deferring bond interest

Further to raising $130m of new funds for Avanti, the amendments allow Avanti to make the next three bond interest payments as PIKs. These are due in April 2017, October 2017 and April 2018. The cash savings Avanti can achieve on these payments in FY17 and FY18 aggregate $112m, a significant contribution to near term liquidity which can be triggered by the company on a minimum liquidity test as each payment becomes due. The penalty to Avanti and other stakeholders is that if all the savings were achieved, the nominal outstanding would increase by 16% to $947m from the revised gross bond debt of $840.5m following the completion of the refinancing transaction.

Clarifying terminology

The bond deal involves a PIK arrangement for interest on Avanti’s outstanding bonds, similar to the process used for the October 2016 bond interest payment. Instead of paying the bond interest in cash, the company provides an alternative form of payment, in this case additional bonds issued at a rate 500-550bps higher than the coupons of the new classes of bond. That is to say if 10% cash interest is due on a bond, the company issues bonds with a nominal worth equivalent to 15% of the nominal value in issue. The new bonds carry the same cash coupons and terms as those already in issue, increasing the outstanding nominal by the 15% issued.

By doing this the company retains the cash that it would otherwise pay out in interest, but increases the overall nominal of the aggregate issue it will have to redeem at maturity. Clearly the use of the PIK is dilutive to other stakeholders.


Exhibit 4: Financial summary

$m

2014

2015

2016

2017e

2018e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

65.6

85.2

82.8

84.2

127.4

Cost of Sales

(86.7)

(83.8)

(86.0)

(86.4)

(89.2)

Gross Profit

(21.1)

1.4

(3.2)

(2.3)

38.2

EBITDA

 

 

(5.8)

13.9

6.1

12.3

67.6

Operating Profit (before amort. and except.)

 

 

(53.9)

(32.6)

(39.8)

(34.2)

1.7

Intangible Amortisation

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

Exceptionals

5.3

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

Operating Profit

(48.7)

(32.8)

(40.0)

(34.4)

1.5

Net Interest

(38.9)

(40.5)

(27.0)

(51.5)

(94.0)

Profit Before Tax (norm)

 

 

(93.0)

(73.3)

(67.0)

(85.9)

(92.5)

Profit Before Tax (FRS 3)

 

 

(87.7)

(73.3)

(67.0)

(85.9)

(92.5)

Tax

0.0

0.0

(2.2)

0.0

0.0

Profit After Tax (norm)

(92.0)

(73.3)

(69.2)

(85.9)

(92.5)

Profit After Tax (FRS 3)

(87.7)

(73.3)

(69.2)

(85.9)

(92.5)

Average Number of Shares Outstanding (m)

107.4

119.0

139.4

153.5

162.1

EPS - normalised (c)

 

 

(85.2)

(61.4)

(49.3)

(55.6)

(56.7)

EPS - normalised fully diluted (c)

 

 

(85.2)

(61.4)

(49.3)

(55.6)

(56.7)

EPS - (IFRS) (c)

 

 

(81.2)

(61.4)

(49.3)

(55.6)

(56.7)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

-32.1

1.6

-3.9

-2.7

30.0

EBITDA Margin (%)

-8.8

16.3

7.4

14.7

53.1

Operating Margin (before GW and except.) (%)

-82.1

-38.2

-48.1

-40.6

1.4

BALANCE SHEET

Fixed Assets

 

 

645.9

721.5

804.5

870.9

930.8

Intangible Assets

14.0

11.0

10.8

10.6

10.4

Tangible Assets

610.9

691.0

775.1

841.7

901.8

Investments

21.1

19.5

18.6

18.6

18.6

Current Assets

 

 

235.7

160.3

137.8

157.0

133.8

Stocks

1.7

2.6

1.9

1.8

2.6

Debtors

21.0

17.8

39.3

36.5

40.0

Cash

195.3

122.2

56.4

84.4

57.1

Other

17.6

17.7

40.2

34.2

34.0

Current Liabilities

 

 

(44.4)

(36.6)

(86.1)

(69.0)

(66.0)

Creditors

(39.9)

(31.9)

(82.8)

(69.0)

(66.0)

Short term borrowings

(4.5)

(4.7)

(3.3)

0.0

0.0

Long Term Liabilities

 

 

(527.7)

(540.5)

(654.7)

(843.3)

(975.4)

Long term borrowings

(512.4)

(523.7)

(642.0)

(830.6)

(962.7)

Other long term liabilities

(15.3)

(16.8)

(12.7)

(12.7)

(12.7)

Net Assets

 

 

309.4

304.7

201.5

115.6

23.1

CASH FLOW

Operating Cash Flow

 

 

5.1

(8.1)

(22.7)

19.9

76.5

Net Interest

(39.0)

(54.4)

(67.4)

(32.5)

(28.3)

Tax

0.0

0.0

(2.2)

0.0

0.0

Capex

(25.8)

(102.0)

(95.7)

(86.7)

(115.9)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Financing

(7.6)

80.0

5.3

(58.0)

(91.7)

Dividends

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

(67.3)

(84.5)

(182.7)

(157.3)

(159.4)

Opening net debt/(cash)

 

 

254.4

321.7

406.2

588.9

746.2

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

(0.0)

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

321.7

406.2

588.9

746.2

905.6

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Avanti Communications and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Avanti Communications and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Xbrane Biopharma — Update 1 March 2017

Xbrane Biopharma

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