Inmarsat plc, the leading provider of global mobile satellite communications services, today announces financial results for the year ended 31 December 2017.
• 2017 Group Revenue increased $71.2m (5.4%) to $1,400.2m ($1,273.5m, excluding Ligado):
o Maritime: strong progress and return to quarterly year-on-year revenue growth, with high bandwidth Fleet Xpress (“FX”) product gaining increasing market traction. Over 2,600 FX vessels by year end (2016: 335 vessels)
o Government: material revenue growth in 2017, with new contract wins more than offsetting the pressures of on-going budgetary constraints and low operational tempo in our customer base
o Aviation: double digit revenue growth, reflecting In-Flight Connectivity (“IFC”) installation revenues, with 194 aircraft now installed with Global Xpress (“GX”) terminals (2016: 20) and another year of strong growth in our Core businesses in Business & General Aviation (“BGA”) and Safety & Operational Services (“SOS”)
o Enterprise: strong growth in M2M services partially offset decline in legacy services revenue
o GX: airtime and related revenues of $142.3m (2016: $78.5m), supporting competitive positions in Maritime and Government and access to the fast-growing IFC market
o Q4 Group Revenue: reduced by $4.4m mainly reflecting one-off US Government airtime contract in Q4 2016
• 2017 Adjusted EBITDA: down $43.4m (5.5%) at $751.4m ($626.7m, excluding Ligado):
o Key drivers: revenue growth of $71.2m offset by further planned investment in IFC market capture and service delivery (an increase of $23.5m) and in developing our networks and back office infrastructure (an increase of $41.9m), as well as changes in revenue mix ($46.7m)
o Q4 Adjusted EBITDA3 : $38.2m lower, mainly reflecting lower revenues and adverse revenue mix (including one-off US Government airtime contract in 2016)
• Profit After Tax: down $61.1m (25.1%) to $182.3m, mainly due to lower EBITDA and higher depreciation
• Network development: Inmarsat-5 F4 and Inmarsat-S EAN satellites successfully launched in H1 2017, European Aviation Network (“EAN”) progressing to commercial launch, design and build programmes for the 5th GX satellite and Inmarsat-6 F1 & F2 L-band replacement satellites on track
• Headcount reduction programme: implemented in Q4 2017, as part of our ongoing tight control of overheads, at a cost of $19.9m (excluded from adjusted EBITDA) to reduce our legacy costs and ensure that we have the capacity to invest in new skills to support the future growth of the business
• Capital expenditure: increased to $598.7m (2016: $412.9m), mainly due to investment in major infrastructure projects, including the two successful satellite launches
• Dividend: the Board has today taken the decision to reduce the level of annual dividend payment to 20 cents per share, to ensure that the Group has sufficient financial resources to support delivery of a leading position in IFC through the current infrastructure investment period
Rupert Pearce, Chief Executive Officer, commented on the results: “Inmarsat delivered further operational and strategic progress in 2017, comprising both gratifying near term revenue growth as well as several important strategic proof-points around exciting medium term growth opportunities, especially in IFC.
“Our investment in Global Xpress, our high bandwidth global mobile satellite network, is starting to show material returns, generating over $140m of revenue in the year. Our strategic investment in GX will enable us to retain and develop our competitive positions in Maritime and Government and will ensure that we are well placed to access the substantial opportunity in IFC in Aviation.
“In Maritime, we made important strategic progress in securing the long term future for Fleet Xpress, with significant commitments signed with leading distribution partners. After a challenging year in 2016, which continued into Q1 2017, we delivered quarter-on-quarter growth throughout the year, and year-on-year revenue growth in the fourth quarter. In Government, we delivered on our strategy to diversify our contracted revenue base and product base, supported by another excellent operational performance during the year. In Aviation, we further established our market position in IFC, through commercial momentum and strategic investment, and our Core business delivered double digit revenue growth throughout 2017. In Enterprise, notwithstanding current challenges, we remain optimistic about the long term future demand for M2M connectivity in the emerging global internet of things (“IoT”) market.
“Given Inmarsat’s track record, unique capabilities and differentiated market position, we are well placed to continue to grow our revenues in 2018 and beyond and to capture significant additional medium term growth opportunities available to us, particularly in in-flight connectivity.”
The Board remains confident in the medium to long term growth outlook for the business. This confidence reflects the strong long term growth anticipated in Inmarsat’s key mobile satellite communications markets, Inmarsat’s market-leading global broadband GX capabilities, our unique competitive position within each of the fast-growing Aviation markets, the resilience and agility of our established L-band business and its future growth potential, the power of our global distribution channels and our full-service global mobile telecommunications offering.
Together, these elements ensure that Inmarsat will continue to be strongly positioned for further growth over the medium to long term in our chosen markets. In Maritime, we are confident that our future growth will be founded on continued progress in penetrating the maritime VSAT market segment and on diversification of our L-band business into new market segments. In Government, we remain well-placed to capture value over the medium term as the trusted provider of unique space-based capabilities to governments as and when near-term budgetary and operational tempo headwinds start to ease. In Enterprise, future growth is targeted in the emerging IoT opportunity, where we expect satellite services to play a substantial global role over the medium term. Finally, we expect that Aviation will be the largest individual growth driver for the Group in the coming years, through the consistent double-digit growth trajectory of our Core Aviation business and through the exceptional medium term growth potential of the fast-emerging and substantial IFC segment, in which we have a burgeoning market presence.
For the Group as a whole, building on the strong positive momentum achieved in 2017, and based on our recent contract wins in a number of markets, we expect further revenue growth in the short term to come mainly from material new GX revenue streams.
We also expect our L-band business to remain resilient over the medium term, given its differentiated characteristics, with future growth coming from the emergence of new market opportunities, such as IoT, services to smaller vessels and aircraft, and next generation maritime and aviation safety services.