5th May 2016 10:56
LONDON (Alliance News) - Satellite business Inmarsat PLC was amongst the worst performers in the FTSE 100 Thursday after it revised down its 2016 guidance for revenue, amended its cooperation agreement in the US with Ligado Networks, and reported a fall in pretax profit for the first quarter of the year.
Inmarsat reported a pretax profit of USD58.5 million in the three months to end-March, down from USD96.3 million a year before, on revenue of USD298.6 million, down from USD304.8 million.
Although the company saw revenue increase in its Aviation and Government segments, this was offset by drops in its Maritime and Enterprise segments.
Inmarsat said in Maritime that the commercial shipping market remained "mired in recession", and had also been hit by recent oil price volatility. In Enterprise, Inmarsat highlighted the depressed global energy industry and "robust competition" from terrestrial mobile operators.
Aviation revenue was up 15%, helped by a strong performance from its SwiftBroadband business, although Inmarsat noted this growth was slower than in the previous year, due to contracts with distributors that were not repeated. It cautioned that it is also seeing "some early signs of a softer market, with a reduction in end user traffic in Europe."
In its Government segment, revenue was up 2.8%, helped by a big US government contract win, alongside a general slow down in the rate of decline in US government revenue, down 2.6% in the first quarter compared to a 13% decline for 2015 as a whole.
The company said that the underlying trading environment in 2016 has continued to be tough, and demand weakened in the first quarter. Additionally, for operational reasons the ramp up in revenue from its Global Xpress satellites is "proceeding more slowly than previously expected."
Since bringing its Global Xpress satellite network into operation at the end of 2015 it has launched services for the Maritime and Enterprise markets. Whilst it remains "very pleased" by the level of customer interest and demand for its Global Xpress products and services, it is seeing expected 2016 revenue slide "modestly" into 2017.
Inmarsat has revised its revenue guidance, excluding revenue from Ligado, for 2016 downwards by USD50 million to USD1.18 billion to USD1.25 billion.
All of its other financial guidance remains unchanged, Inmarsat said, and it still expects to see Global Xpress revenue of USD500 million by the end of 2020.
It continues to expect group revenues in 2018 to grow between USD1.45 billion and USD1.60 billion, and for its capital expenditure to be between USD500 million and USD600 million in 2016, 2017 and 2018.
Under the amended cooperation agreement, Ligado Networks has opted for the 30 megahertz option; under variations agreed, Ligado will pay Inmarsat USD337 million over 2016 to 2018, Inmarsat said. The two companies have agreed to delay the timing of the transition to the 30 megahertz plan, and Ligado has provided Inmarsat with enhanced spectrum usage rights for its satellite operations for a minimum of two years, Inmarsat said.
"Many of our markets face short-term headwinds which intensified in the first quarter, leading to a softer revenue performance than expected, although we remain highly competitive in each of our core markets, growing market share and diversifying the business to plan," said Chief Executive Officer Rupert Pearce in a statement.
"Whilst in the near-term business growth will continue to be challenging in choppy markets, we remain very well positioned for future growth and diversification, and indeed I remain confident that the foundations that we are establishing will deliver the expected medium term growth," Pearce added.
Shares in Inmarsat were down 5.9% at 875.25 pence Thursday, one of the worst performers in the FTSE 100.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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