Inmarsat plc Reports Interim Results 2013

London, UK: Inmarsat plc (LSE: ISAT.L), the leading provider of global mobile satellite communications services, today provided the following information for the six months ended 30 June 2013.

Inmarsat plc – Highlights (1)

  • Adjusted total revenues $635.2m up 1% (2012: $629.6m)
  • Adjusted EBITDA $327.2m (2012: $332.1m)
  • Profit before tax $185.5m (2012: $222.8m)
  • Adjusted profit before tax $183.5m up 6% (2012: $173.5m)
  • Interim dividend of 17.79 cents (US$), up 5%
  • Strong subscriber growth: FleetBroadband, XpressLink, SwiftBroadband
  • Total active terminals up 10%
  • Alphasat satellite successfully launched

Inmarsat Group Limited – Second Quarter Highlights

  • Inmarsat Global MSS revenues $195.9m up 3.7% (2012: $188.9m)
  • Inmarsat Solutions revenues $195.1m (2012: $205.4m)
  • Total EBITDA $174.0m (2012: $176.0m)

Rupert Pearce, Inmarsat's Chief Executive Officer, said, “During the second quarter, subscriber growth for key MSS services and the take-up of package-based maritime services contributed to a solid performance for Inmarsat Global MSS revenues. As a result we are now on track to achieve the top of our two-year target range for wholesale MSS revenue growth. Within our Inmarsat Solutions business, while the contracting environment for our US Government business remains challenging, the revenue results for our other business units have remained positive and, with tight cost control across the group, we are satisfied with the overall results for the quarter.

We are also pleased with the successful launch and early stage deployment of our Alphasat satellite. Alphasat enhances the capacity, power and coverage of our network for the EMEA region, provides for in-orbit network redundancy and extends the life our Inmarsat-4 network. Alphasat materially improves the risk profile and sustainability of our L-band operations.”

Inmarsat plc
(US$ in millions) 2013 Half year 2012 Half year Increase /(decrease)
Inmarsat Global – MSS revenue 380.5 366.9 3.7%
Inmarsat Global – Other income (incl LightSquared) 23.4 74.3 (68.5%)
Inmarsat Solutions 384.6 396.2 (2.9%)
  788.5 837.4 (5.8%)
Intercompany eliminations and adjustments (148.2) (153.2)  
Total revenue 640.3 684.2 (6.4%)
Inmarsat Global
(US$ in millions) 2013 Half year 2012 Half year Increase / (decrease)
Maritime voice services 36.7 41.4 (11.4%)
Maritime data services 178.6 159.5 12.0%
Total maritime sector 215.3 200.9 7.2%
Land mobile voice services 9.5 5.5 72.7%
Land mobile data services 56.4 60.7 (7.1%)
Total land mobile sector 65.9 66.2 (0.5%)
Aviation sector 55.9 49.4 13.2%
Leasing 43.4 50.4 (13.9%)
Total MSS revenue 380.5 366.9 3.7%
Other income (including LightSquared) 23.4 74.3 (68.5%)
Total revenue 403.9 441.2 (8.5%)

Maritime

Growth in our maritime data revenues was driven by increased take-up and usage of our FleetBroadband service and by pricing and service package changes primarily implemented in May 2012 and March 2013. During the first half we added 4,140 FleetBroadband subscribers of which 2,216 were added during the second quarter. We are continuing to see strong take-up of FleetBroadband pricing packages, thereby driving further ARPU growth and increasing maritime revenue visibility.

Land mobile

In the land mobile sector, we saw strong growth in voice services offset by a decline in data revenues due to on-going troop withdrawals from Afghanistan. We estimate that global events including Afghanistan contributed $3.7m more revenue in the first half of 2012 when compared to the first half of 2013. We continue to grow our BGAN subscriber base and, during the second quarter, we saw growth in land mobile data revenues quarter on quarter. Growth in land mobile voice revenues was driven by our IsatPhone Pro handheld service.

Aviation and Leasing

The increase in aviation revenue was driven by strong growth in revenues from our SwiftBroadband service, offset by a decline in Swift 64 revenues due to lower usage by certain government customers, including usage related to reduced activity in Afghanistan. Growth in SwiftBroadband revenues was driven by take-up in business aviation and for commercial in-flight passenger connectivity services. The decrease in leasing revenue was due to a reduction in revenue from certain government aviation and maritime contracts.

Inmarsat Solutions
(US$ in millions) 2013 Half year 2012 Half year (Decrease)
Inmarsat MSS 193.0 198.5 (2.8%)
Broadband and Other MSS 191.6 197.7 (3.1%)
Total revenue 384.6 396.2 (2.9%)

The decrease in Inmarsat MSS revenue at the Inmarsat Solutions level was driven primarily by a combination of lower leasing revenue and by lower BGAN revenue arising from Afghanistan year-over-year. As Inmarsat Solutions has a disproportionately higher share of both our leasing and BGAN business, the lower revenues from these business lines gave rise to an overall decrease in Inmarsat MSS revenues reported by Inmarsat Solutions, even though MSS revenues grew at the wholesale level.

The decline in Broadband and Other MSS revenue was primarily due to a reduction in revenue from the managed network services segment of our US Government business unit. This decrease was primarily a result of contract renewals at lower rates and non-renewals and follows the implementation of US Government defence spending reductions. The decline was partially offset by growth in VSAT revenues as a result of further take-up of our XpressLink service. At the end of the quarter we had an installed base of 1,301 ships using our VSAT service, including 525 ships using XpressLink.

Outlook

As a result of the MSS revenue growth reported in the year to date, driven by our key MSS services, FleetBroadband, SwiftBroadband, BGAN and IsatPhone Pro, we are now on track to achieve the top of our two-year target range for Inmarsat Global MSS revenue growth.

Our Global Xpress programme is proceeding well and we are encouraged by the very positive commercial dialogue developing with potential customers and distributors. While our technical progress has remained in line with plan, we are currently waiting for the outcome of an investigation into the failure of a Proton launch vehicle in early July. While it is too early to determine any schedule impact of the failure, there is a risk of a short delay to the launch of the first Inmarsat-5 satellite, and therefore, to the start of GX services.

As disclosed at the time of our first quarter Interim Management Statement in May, the outlook for our Inmarsat Solutions business has significantly deteriorated in relation to the retail revenues of our US Government business unit. As a result of US defence spending cuts, we have seen a significant loss of revenue and decline in operating margins and expect further contract losses before the end of the year and in 2014. The impact on overall results for our Inmarsat Solutions business may be partially offset by a more positive outlook for other business units, in particular by Commercial Maritime, where XpressLink sales have remained strong.

Our 2013 expectations for capital expenditure on a cash basis remain unchanged. However, while a launch delay to the first Inmarsat-5 satellite could result in an outward phasing of certain capital expenditure payments, it should not result in any material increase in the total programme costs.

Dividend

Inmarsat remains committed to growing a sustainable dividend to shareholders. Taking into account the stable cash flows from our Inmarsat Global business and our confidence in future returns from our Global Xpress programme, we believe a 5% increase in the dividend is both sustainable and appropriate to the period of transition to the start of Global Xpress commercial operations.

Liquidity

At 30 June 2013, the Inmarsat plc group had net borrowings of $1,696m, made up of cash and cash equivalents of $216m and total borrowings of $1,912m. Including cash and available but undrawn borrowing facilities, the group had total available liquidity of $1,193m. We remain fully-funded as to all our capital needs for the foreseeable future.

Our Financial Reports

While Inmarsat plc is the ultimate parent company of our group, our subsidiary Inmarsat Group Limited is required by the terms of our Senior Notes to report consolidated financial results on a quarterly basis. A copy of the full financial report for Inmarsat Group Limited for the second quarter ended 30 June 2013 can be accessed via the investor relations section of our website.

Other Information

Inmarsat management will host an interim results conference call at 14.00hrs BST (UK) time, 09.00hrs EST (US) on Friday 2 August. To access the call please dial +44 (0)20 3427 1905 and quote conference id 9834847. The call will also be available via a live webcast accessible through our website. A replay of the call will be available for one week after the event. To access the recording please dial +44 (0)20 3427 0598 and enter access code 9834847#.

Forward-looking Statements

Certain statements in this announcement constitute “forward-looking statements”. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those projected in the forward-looking statements. These factors include: general economic and business conditions; changes in technology; timing or delay in signing, commencement, implementation and performance or programmes, or the delivery of products or services under them; structural change in the satellite industry; relationships with customers; competition; and ability to attract personnel. You are cautioned not to rely on these forward-looking statements, which speak only as of the date of this announcement. We undertake no obligation to update or revise any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances.

Contact

Inmarsat plc, London, UK

Investor Enquiries:
Simon Ailes
Tel: +44 (0)20 7728 1518
simon.ailes@inmarsat.com
Media Enquiries:
Chris McLaughlin
Tel: +44 (0)77 9627 6033
christopher.mclaughlin@inmarsat.com

(1) “Adjusted” as applied to total revenue, EBITDA and profit before tax, excludes the relevant contribution from our Cooperation Agreement with LightSquared.