Companies: ASG   

Inspired selling the day before Avanti Screenmedia’s half-time profits announcement last week signalled an upset somewhere and, indeed, profits came in £100,000 lower than before at £188,000 despite a 14 per cent rise in turnover to £4 million. The reason was not hard to find. Avanti’s headcount nearly doubled to 99 people as the company geared up for a much expanded networks business (broadband and the emerging satellite operation).

This had not been flagged before and came as something of a shock – even though it would be unreasonable to assume Avanti could manage its transformation into a satellite operator without extra staff. But chief executive David Williams remains comfortable with existing City forecasts for the year and it is apparent that the traditional profit-maker, the retail screens business serving pubs and shopping malls, is going well. The business is, in any event, heavily second-half weighted.

The shares picked up again as the market latched on to the satellite potential. When launched in 2008, Avanti’s’ satellite will have the equivalent of 40 32Mhz transponders and a life of at least 15 years. The price of a transponder in Europe is currently between €1 million and €4 million, says Williams. That would value Avanti’s satellite at between £27 million and £108 million. Its market capitalisation at the current 271.5p (up from my 246.5p recommendation price in October) is approximately £63 million. Deduct a cash holding of £21.5 million and it looks as if the retail screens business is in for free. The shares remain a hold.