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The market has responded negatively to Avanti’s figures and announcement that it is demerging the satellite business, Avanti Communications Group (ACG), from the screen media side. The shares have come back from 325p to 260p since the announcement. That compares with a recommendation level here in October 2005 of 246.5p.

The main problem is the size of loss revealed in the screenmedia business, which is going to have to survive alone in future. The trading loss should shrink this year and there are two leading retailers at or beyond pilot contract stage. However, the view of analysts is that few institutions will want to hold shares in this business long term. Prospects for the satellite operation, where Avanti now seems set on building a fleet of satellites as quickly as possible, look exciting.

Under the proposed demerger, shareholders will get one share in ACG for every Avanti share they currently hold. The combined value of the two operations looks to be substantially in excess of £3 a share and there is clearly no point in selling ahead of the demerger (expected to take effect on 16 April). I suspect that the satellite side, ACG, will attract a good following. One to review post the demerger. For now, continue to hold.

Avanti Screenmedia Group	AIM	£0.95m	1.62p	-0.25p
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Other company articles:
Avanti fixes new funding			18/07/2008
Avanti Screenmedia’s double whammy			02/07/2007
The evolution of Ora			19/04/2007
Avanti Screenmedia does the splits			23/03/2007
Avanti does the splits			14/12/2006