6th Aug 2015 09:59
LONDON (Alliance News) - FTSE 100-listed satellite communications company Inmarsat reported a fall in pretax profit for its first half, hit by delays to the launch for its Global Xpress satellite and in turn the launch of its Global Xpress global commercial service, but it raised its interim dividend.
Shares in Inmarsat were up 3.9% at 931.00 pence Thursday morning, the biggest gainer in the FTSE 100.
In May the company suspended its guidance of an 8% to 12% compound annual growth rate in revenue from wholesale mobile satellite services over 2014 to 2016, as the launch of the third Global Xpress satellite was delayed, due to the failure to launch of the Proton Breeze M rocket.
However, the company said Thursday that it now expects the satellite to be launched for the end of August, and it is targeting for the introduction of its GX global commercial service by the end of the year.
It expects revenue to be in the range of between USD1.25 billion to USD1.30 billion for its full year which it said reflects the lower GX revenue in the second half due to the delayed launch. In 2014 Inmarsat reported revenue of USD1.29 billion.
However, on Thursday, Inmarsat reiterated its longer term guidance of annual GX revenues of USD500 million by the fifth anniversary of the global launch of the services. It said it plans to give further medium-term revenue guidance after the satellite is launched successfully.
Inmarsat said its pretax profit was USD165.9 million in the first half, down from USD168.3 million a year before, as revenue fell to USD616.2 million from USD652.3 million.
The results were dragged lower by a weak performance in the second half, when revenue fell in its maritime arm, its largest division, and it saw continued weakness in its government division due to reduced budgets. Aviation and enterprise revenue were both higher, but these divisions contribute significantly less of Inmarsat's revenue mix. Additionally, it saw lower revenue from its cooperation agreement with LightSquared Inc.
In Maritime, revenue fell as a result of a faster decline from its older legacy wholesale mobile satellite services, particularly its Fleet services, and a decline in retail terminal sales revenue of more than 50% compared to the previous year.
Enterprise revenue was up 7.9%, excluding a hit from disposals of retail energy-related assets it sold in February and June last year, but fell 5.9% including these disposals. In the second quarter, Global Satellite Phone Service sales slowed significantly due to a manufacturing issue that temporarily halted production of its IsatPhone 2 devices, which Inmarsat warned will lead to lower Global Satellite Phone Service revenue in its second half.
In Aviation, revenue growth was driven by the company's SwiftBroadband service, which provides in-flight internet services, in both the business and general aviation markets. The company said that development of its aircraft cabin connectivity opportunities "is moving forward rapidly", and it is close to finalising "several major airline contracts", as well as developing agreements for rolling out its S-band satellite and complementary ground networks in Europe.
The group said it does not expect any material change in its trading conditions in the second half; it continues to expect underlying growth in its Maritime, Enterprise and Aviation divisions, and continued weakness in Government.
Inmarsat proposed a 5.0% increase of its interim dividend to 19.61 US cents from 18.68 cents a year earlier, which it said reflected its confidence in the "sustainable long-term growth trajectory of the business."
"The return to flight of the Proton launch vehicle after a three-month suspension is welcome news. A successful launch of I-5 F3 in late August will enable us to introduce global GX commercial services by the end of this year, providing a major catalyst for a step-change in revenue and EBITDA growth in 2016," said Rupert Pearce, Inmarsat's chief executive.
Nomura estimated that the company's full year revenue guidance of between USD1.25 billion and USD1.3 billion was around 1% below current consensus. However, the company closing in on major airline contracts "could provide some comfort", Nomura said.
By Sam Unsted; [email protected]; @SamUAtAlliance and Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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