When a company releases its profit results after the market's close on a Friday afternoon, it's rarely good news. That was certainly the case when Newsat Limited (ASX: NWT) announced its first-half results at 5:24pm on Friday, revealing a massive decline in revenues and earnings for the period.
So What: Newsat is a satellite communications company which is best known for its Jabiru-1 project. Jabiru-1 is Australia's first non-government, non-foreign owned satellite whose launch date has repeatedly been postponed, much to the disappointment of investors around the world. Here are some of the key takeaways from its first-half report:
- Revenue down 17% to $13.69 million
- Gross margin of $3.9 million down 43%
- A net loss down 2,393% compared to the $1.59 million loss recorded in the prior corresponding period
- Operating cash flow of negative $2.7 million, down 66%
- Cash and cash equivalents of $21.44 million, down 34%
- Earnings per share of (6.4 cents), down 2,164%
While the company blamed a strengthening US dollar and "challenging market conditions" for its poor performance, the company also finds itself under enormous financial pressure. Not only is it in a net current liability position of $300 million, Newsat must also renegotiate hundreds of millions of dollars in loans or else it could face liquidation.
As reported by the Fairfax press, external auditors have also reported concerns regarding "uncontrolled spending and questionable transactions" last year following an internal review.
Now What: While it once possessed enormous promise, Newsat has instead proven to be a disastrous investment with the stock now trading at 12.5 cents, down 86% from a record-high of 88 cents in 2012. Investors would be wise to steer clear and focus on some of the market's safer alternatives, including the ultra-promising tech stock our top analyst just named his BEST stock to buy in 2015.
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