Inmarsat plc reports Interim Results 2018


Inmarsat plc, the leading provider of global mobile satellite communications services, today provided the following unaudited information for the half year and second quarter ended 30 June 2018,

Operational highlights – H1 2018:

 Group Revenue increased $33.5m (4.9%) to $717.2m (up 5.2% to $652.4m, excluding Ligado), predominantly driven by growth in Aviation and reflecting our diversified and resilient growth portfolio:

o Maritime: solid performance supported by continued strong market traction with Fleet Xpress

o Government: robust performance against tough comparator in Q2

o Aviation: on-going double digit revenue growth:

 In-flight Connectivity (“IFC”) revenues doubled, with over 1,400 aircraft under contract and first IFC airtime revenues generated

 Another excellent performance in our Core business, with revenues up 17.1%

o Enterprise: performance mainly driven by satellite phone airtime and handset revenues

o GX: airtime and related revenues doubled to $110.2m (H1 20171 : $53.0m), including $60.2m in Q2 2018, (Q2 20171 : $24.8m) with continued customer take-up in every target market

o Q2 Group Revenue: increased 5.0% to $371.8m (up 5.5% to $339.1m, excluding Ligado)

 Group EBITDA: decreased by $6.7m (1.8%) to $373.0m (down 2.5% to $308.2m, excluding Ligado), with growth in revenue and gross margin being offset by higher indirect costs, mainly due to adverse currency movements in Q1:

o Q2 EBITDA: increased 0.8% to $198.1m (up 0.9% to $165.4m, excluding Ligado), driven by generally higher revenues and gross margin

 Adjusted Profit After Tax (excluding impact on income statement of unrealised conversion liability on 2023 convertible bond): declined $35.5m, reflecting changes in EBITDA, depreciation, financing costs and taxation. Statutory PAT (including the unrealised conversion liability element) decreased $170.6m

 Interim dividend of 8 cents per share, in line with the Board’s recently updated approach to dividend pay-outs (H1 2017: 21.62 cents per share)

 Liquidity position further improved: with new 5 year Revolving Credit Facility of $750m agreed, to replace existing $500m facility, on substantially the same terms

Rupert Pearce, Chief Executive Officer, commented on the results and the outlook: “Inmarsat produced a robust set of results for the first half of 2018, delivering against a number of key strategic objectives and maintaining our continued positive operational momentum across a resilient and diversified growth portfolio. This performance highlights the quality of our business and our differentiated market position, which ensured significant market capture gains were achieved across our target end markets in the period. Consequently, we remain well placed to deliver further consistent revenue growth in the short term and to capture significant additional growth opportunities over the medium to long term.”

Inmarsat’s market opportunity and strategic position

The use of data at sea and in the air is expected to continue growing significantly in the future, creating a major opportunity for mobile satellite broadband communication providers.

Inmarsat is extremely well positioned to access the significant market opportunity ahead, given our established and material market presence, our differentiated capabilities in end-to-end reliable and secure networking services to our customers, not simply broadband pipes, our technology leadership, our specialisation in delivering satellite mobility services to customers, our valuable global spectrum assets and our market-leading distribution channel.

As a result of these elements, Inmarsat offers investors a diversified growth portfolio with multiple paths to future value creation, based on a solid foundation of incumbency and differentiated capabilities. We aim to continue delivering moderate growth in Maritime, Government, Aviation and Enterprise from our longestablished L-band services, with higher growth to come from the delivery of new GX services to customers in these markets. Furthermore, we expect to generate significant growth from our delivery of broadband services to the fast-growing and substantial IFC segment in commercial aviation. Our progress in each of these areas was evidenced by our performance in the first half of 2018.

We also have a number of incremental growth opportunities available over the medium to long term. These include monetising the capabilities of our Inmarsat-5 F4 satellite, delivering major strategic projects for Government customers, growing dedicated regional businesses in hitherto untapped geographies, leveraging our digital services capabilities, increasing our presence in the “Internet of Things” environment and supporting Ligado Networks as they lease our L-band spectrum in North America.

Our revenue growth profile will be supported by a focus on operational leverage via a carefully controlled cost base and an infrastructure capital investment programme that is expected to meaningfully moderate from the start of the next decade. This will help to drive our cash flow growth, in line with our revenue growth, over the medium to long term.

Inmarsat is therefore confident in continued profitable growth, ensuring we retain our position as a market leader in our target end markets.

Outlook and future guidance

As a result of these dynamics, the Board remains confident in the growth outlook for the business and we consequently reiterate our financial guidance, as follows:

 Medium term Group revenue, EBITDA and free cash flow growth (all excluding Ligado):

o Targeting mid-single digit percentage revenue growth on average over the next five years, with EBITDA and free cash flow generation expected to improve steadily.

 Group revenue:

o 2018 revenue, excluding Ligado, of $1,300m to $1,500m;

o Annual GX revenues at a run rate of $500m by the end of 2020.

 Group capex:

o Over 2018 to 2020, we expect that capital expenditure will be within a range of $500m to $600m per annum;

o Based on current management plans, infrastructure capex is expected to meaningfully moderate after 2020 as we bring to bear our next generation network augmentation plans.

 Group leverage:

o Net Debt: EBITDA to normally remain below 3.5x.

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