3rd Quarter Results

Inmarsat plc reports Third Quarter Results 2017

Another solid quarter of growth

London, UK: 9 November 2017. Inmarsat plc (LSE: ISAT.L), ("Inmarsat", the "Group"), the leading provider of global mobile satellite communications services, today provided the following unaudited information for the third quarter, and the nine months, ended 30 September 2017.

Rupert Pearce, Chief Executive Officer, commented on the results:

"Inmarsat made further progress in the third quarter, with revenues again ahead of last year. Maritime revenues were unchanged year-on-year, but grew sequentially for the second consecutive quarter. Government and Enterprise delivered higher revenues, whilst Aviation revenues were particularly strong, supported by the continued expansion of our contracted aircraft order book in in-flight connectivity ("IFC"). We have continued to invest in this significant opportunity, and in our core operational capabilities, albeit at the expense of lower EBITDA margins, to ensure that we remain uniquely positioned as the leading operator in global mobility markets. Consequently, whilst our markets remain challenging and the outlook continues to be difficult to predict, I remain confident about the medium to long term prospects for Inmarsat."

Financial Headlines

In the third quarter, revenues grew by 4.8%, or $16.4m:

· Maritime: Revenues unchanged year-on-year but increased sequentially reflecting 26% increase in VSAT revenues but lower FleetBroadband ("FB") and legacy product revenues

· Government: Revenues grew 4%, mainly reflecting stronger US results

· Aviation: Revenues up 50% with growth in both Core business and IFC installation activity. Air Asia's selection of GX confirmed in Q3, bringing aircraft expected under signed IFC contracts to 1,300

· Enterprise: Returned to growth, driven by higher airtime usage and terminal sales following recent hurricanes

· GX airtime and related revenues, across the business units, of $42.3m (YTD: $102.1m)

EBITDA2 was 6.5%, or $13.3m, lower:

· Favourable impact of higher revenues more than offset by changes in revenue mix, particularly in Aviation, by further investment in IFC market capture and delivery, and by higher central operational delivery costs

1 "Other" revenue comprises revenue contribution from Central Services and Ligado Networks.

2 EBITDA is defined as profit before net financing costs, taxation, depreciation and amortisation, gains/losses on disposal of assets, impairment losses and share of profit of associates and, as a non-statutory metric, it has been reconciled to profit after tax later on in this announcement. EBITDA is a commonly used industry measure which helps investors to understand the contribution made by each of our business units.

3 Adjusted PAT is defined as Profit after Tax excluding the non-cash impact of the unrealised movement in the fair value of the conversion liability component of the 2023 convertible bond and the realised movement in the loss on redemption of 2017 convertible bonds, both shown in the Reconciliation of EBITDA to Profit after tax later in this report. Statutory PAT includes the impact of both adjustments.

Outlook & future guidance

The progress being made in Maritime, Government and Aviation provides confidence about the medium to long term outlook for Inmarsat. However, our markets remain challenging and the outlook continues to be difficult to predict. Inmarsat's performance in 2017 and 2018 will continue to be particularly determined by our results in IFC and in Government, as we outlined in March 2017.

Given the combination of these factors, our guidance is as follows:

· 2017 revenue guidance, excluding Ligado, narrowed to $1,225m to $1,275m, from $1,200m to $1,300m;

· 2018 revenue guidance, excluding Ligado, of $1,300m to $1,500m (unchanged);

· Capex guidance of $500m to $600m per annum for each of 2017 and 2018 (unchanged);

· Annual GX revenues at a run rate of $500m by the end of 2020 (unchanged); and

· Leverage (Net debt: EBITDA) to normally remain below 3.5x (unchanged).

As previously highlighted, and as our results for 2017 to date continue to clearly demonstrate, the Group's EBITDA margin is being adversely impacted by the inclusion of additional lower margin service revenues related to IFC, by the cost of investment in IFC market capture and delivery, and by higher central operational delivery costs.

Results conference call

Inmarsat management will discuss the third quarter results in a conference call on Thursday 9 November at 08.00am UK time. The call can be accessed by dialling +44 (0) 20 3427 1922 (from the UK and Europe) or +1 646 254 3369 (from the US), with a passcode of 2033156 and is also accessible via this link: https://edge.media-server.com/m6/p/hnqp7vm6 

Contacts:

Forward looking Statements

This announcement contains 'forward-looking statements' within the meaning of the US Private Securities Litigation Reform Act of 1995. 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.

OPERATING AND FINANCIAL REVIEW OF Q3 2017 RESULTS

The following is a discussion of the unaudited consolidated results of the operations and financial condition of Inmarsat plc (the "Company" or, together with its subsidiaries, the "Group") for the period ended 30 September 2017. This should be reviewed together with the whole of this document including the historical consolidated financial results and the notes. The consolidated financial results were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. In addition to IFRS measures, we use a number of non-IFRS measures in order to provide readers with a better understanding of the underlying performance of our business, and to improve comparability of our results for the periods concerned. All discussion of results relates to the three month period ended 30 September 2017, and all comparisons are with the same period ended 30 September 2016, unless stated otherwise. This report includes additional disclosure relating to year-on-year trends in direct and indirect costs, with data from recent quarters available on the Company's website: www.inmarsat.com.

Introduction

Inmarsat's solid operational performance in the quarter is further evidence of our market-leading position in global mobile satellite services. We remain well placed to maximise the significant growth opportunities that will develop in mobility in the coming years, supported by a number of on-going targeted investment programmes. Importantly, unlike fixed satellite operators, Inmarsat has no exposure to slower growth legacy markets, in particular video and fixed point telecommunications.

As a result of our long-standing and sustainable advantage in coverage, our high performance satellites, our unique and highly secure networks, our embedded safety services and our market-leading distribution network, Inmarsat remains well positioned to continue to further improve our position in global mobility markets in the future.

Financial Highlights & Summary

Three months ended 30 September 

Nine months ended 30 September 

1 Capital expenditure is stated on a cash basis throughout this report. Cash capital expenditure is the cash flow relating to tangible and intangible asset additions, it includes capitalised labour costs and excludes capitalised interest. It has been reconciled to capital expenditure on an accruals basis in note 3 of this announcement. Cash capex indicates our continued investment in the growth and development of our network and infrastructure as well as our investment in the future technologies of the business.

In the three months ended 30 September 2017, Group revenues increased by $16.4m (4.8%) with revenue growth in Aviation ($18.0m, including $10.9m of low margin installation revenues), Government ($3.6m), and Enterprise ($0.6m) being partially offset by reduced contributions from Maritime ($0.1m) and Other ($5.7m, including $3.6m relating to Ligado).

Direct costs in the quarter increased by $9.7m, which led to gross margin declining to 85.7% (2016: 87.8%). This reflected the changing revenue mix, including the addition of low margin installation revenues in Aviation, (with related direct costs up $8.6m in the quarter).

Indirect costs in the quarter increased by $20.0m, reflecting increased investment in our IFC capability in Aviation ($8.6m in Q3 2017) and an underlying increase in central operational delivery costs ($8.0m in Q3 2017). Excluding these focused investments, tight cost control was maintained across the business.

As a result of the increase in direct and indirect costs, which more than offset the increase in revenue for the quarter, EBITDA for Q3 2017 decreased by $13.3m (6.5%) from the prior year, and EBITDA margin decreased to 53.4%, from 59.8% in Q3 2016.

Statutory PAT increased by $58.1m in the quarter mainly as a result of the non-cash impact of an unrealised decrease of $56.4m in the quarter in the fair value of the conversion liability component of the convertible bond on the net financing charge. In Q3 2016, there was a $10.6m increase in this component, as well as a one-off pre-tax loss of $32.8m on the redemption of the 2017 convertible bond. Adjusted PAT declined by $35.1m in the quarter, mainly as a result of the exclusion of these non-cash elements, as well as lower EBITDA and higher depreciation and amortisation charges.

Maritime

1 FB is utilised by customers on a standalone basis, but also as an integrated element of our VSAT products, as an L-band back-up.

In the third quarter, Maritime revenues were unchanged year-on-year and grew sequentially for the second consecutive quarter.

Revenue from our Very Small Aperture Terminal ("VSAT") products, XpressLink ("XL") and Fleet Xpress ("FX"), rose by 25.8% in Q3, further accelerating from 21.0% growth in Q2 and 18.0% growth in Q1, illustrating continued increasing customer usage of our high bandwidth products.

There were 3,960 VSAT vessels at the end of the quarter, up 1,042 from the prior year, with the number of FX vessels increasing by 1,843 (including 753 migrated from other VSAT products), with other VSAT products declining year-on-year by 801 vessels (which includes the 753 migrations to FX). The VSAT installation order book has also increased, rising to around 630 vessels at the end of the third quarter of 2017, as compared to around 540 vessels at the end of Q3 2016.

The pace of FX installations continued to accelerate, bringing the total FX installed fleet to 1,960 vessels, with an increase of 623 vessels in the quarter (529 increase in Q2 and 473 in Q1). This was driven by the continued ramp-up of our internal installation capability and the growing engagement of our distribution partners, as well as an increase in the number of ports available for FX installation.

The overall proportion of completely new customer installations increased to 47% (Q2: 22%, Q1: 19%):

By the end of Q3, 423 installed FX vessels were with our distribution partners (Q2: 243, Q1: 97).

VSAT Average Revenue per User ("ARPU") in the third quarter was 4.1% lower than Q3 2016, reflecting the continued impact of a change in mix towards lower ARPU revenues on FX, particularly as wholesalers continue to increase their share of this mix, whilst ARPU for XL vessels remained relatively stable. VSAT ARPU is expected to continue to decline as further wholesale revenues are added to the mix.

Revenues for FleetBroadband ("FB"), our core L-band product, declined by 6.8% in the third quarter. This was mainly due a loss of vessels using the product, to 36,809 at the end of Q3 2017, from 38,571 at the end of Q3 2016. 1,149 of these vessels were lost as a result of scrappages, increased competition at the low end of the market and migrations to Fleet One. In addition, there was the overall ARPU-accretive migration of 613 vessels up to FX, year-on-year. These factors more than offset the positive impact of customers moving to higher value packages within FB.

Revenue from our mainly lower margin and legacy products continued to decline, falling by 1.6% in Q3 2017. This relatively moderate revenue decline included the positive effect of revenue growth related to the sales of Fleet One hardware and airtime as well as FX terminals, which together contributed a combined increase in revenue of $4.1m in Q3 2017. Excluding these positive effects, the underlying revenue decline in our legacy product base was $4.5m, or 19%.

Over 600 new Fleet One terminals were installed during the third quarter, taking the products' customer base to over 2,600 vessels by the end of the period, with an average ARPU of around $90 per month. This is an increase of around 1,600 vessels, from the end of Q3 2016.

Against the backdrop of flat revenues, direct costs increased by $0.6m, 3.0%, in the quarter, reflecting a slight change in revenue mix. Indirect costs decreased by $1.0m, 9.9%, driven by the impact of an internal reorganisation in July 2016, which moved costs of $2.0m during the third quarter from Maritime into Central Services, which offset an increase in marketing costs of $0.7m. As a result of the small reduction in operating costs, EBITDA in the third quarter was up by $0.3m, 0.3%, and EBITDA margin increased to 79.3% (from 79.0% in the prior year).

Maritime capex increased by $0.2m in the third quarter, due to growth in success-based capex, related to the ramp-up in FX installations.

Government

Our Government business continued to perform well, with revenues up 4.2% in the third quarter.

US Government revenues grew by 15.9% in the third quarter, driven by the impact of short term higher operational tempo, some of which was hurricane-related, and additional revenue from the US Navy Commercial Broadband Satellite Program Satellite Services Contract ("CSSC") but, as expected, lower revenues from our Take or Pay contract with Boeing.

Outside the US, Government revenues fell by 14.5% during the third quarter, reflecting a material reduction in exceptional operational revenues which had been received since Q3 2015.

Direct costs during Q3 2017 decreased by $1.7m, (12.1%), partly due to lower bad debt provisions, whilst indirect costs increased by $0.7m, or 6.5%. EBITDA consequently improved by $4.6m, 7.7%, and EBITDA margin increased to 73.1% in the third quarter, from 70.8% in the prior year.

The significant increase in revenue in the Government business achieved in the first half of 2017 will not be sustained during the second half of 2017, given a one-off revenue item in Q4 2016, a lower contribution from the Boeing take or pay contract during H2 2017 and the material reduction in exceptional operational revenues outside the US, which also means that the base for growth in 2018 will be lower.

Aviation

In Business & General Aviation ("BGA"), SwiftBroadband revenues grew by 18.2% in the third quarter, with an increase in number of installed aircraft and higher ARPU, driven by higher customer airtime usage. In addition, there was an increased contribution from our L-band based IFC services in commercial aviation. The installation programme for JetConneX, our new GX-based product for the BGA market, gained further traction, with over 100 terminals now installed, generating revenue of $1.5m in Q3 2017.

In Safety & Operations Services ("SOS"), Classic Aero produced revenue growth of 16.7% in the third quarter of 2017, with an increase in number of installed aircraft and as a result of higher ARPU, reflecting higher customer airtime usage.

In IFC, our GX terminal installation programme for Deutsche Lufthansa Group remains on track, in preparation for active service, with 141 aircraft installed at the end of Q3 2017 (from 101 at the end of Q2 2017 and 20 at the end of 2016). A number of other customers initiated installation programmes for GX aviation terminals during Q3. As a result, $10.9m of relatively low margin installation revenue was generated in Q3 (YTD 2017: $19.5m). In addition, AirAsia, Philippine Airlines and Air Astana signed up for the provision of IFC services via GX during the third quarter, and we now have over 1,300 aircraft expected under signed contracts for IFC services. Our active pipeline remains at around 3,000 aircraft.

The European Aviation Network ("EAN") service remains on course for the start of the final phase of operational launch by the end of 2017, following successful flight trials over recent months. Our launch customer has started equipping aircraft with EAN hardware and is expected to begin activating aircraft for passenger trials in early 2018, with European fleet-wide roll-out into 2019. We have all 28 EU territory MSS regulatory authorisations required for operation, plus Norway and Switzerland. In addition, 29 countries have now provided authorisations or in-principle approvals for the complementary ground component, including the UK and Germany.

In the third quarter of 2017, direct costs increased by $8.6m to $9.3m as a result of additional lower margin GX installation revenues being added to the revenue mix, whilst indirect costs increased by $8.6m to $19.4m due to increased headcount and other overhead costs associated with the pursuit and delivery of the major growth opportunities in IFC. EBITDA increased by $0.8m, 3.3%, in Q3 2017, with EBITDA margin declining to 46.8%, from 68.0% in the prior year, reflecting the changing revenue mix and higher indirect costs.

Going forward, and as our results for 2017 to date clearly demonstrate, we still expect that Aviation EBITDA margins will continue to be impacted by our efforts to build our market position in IFC. Revenues will initially be low margin installation revenues rather than higher margin air time revenues, as we drive equipment installation programmes for certain customers. In addition, indirect Aviation costs will continue to rise as we invest in IFC market capture and delivery (we continue to expect that indirect costs in Aviation will increase to around $70m for FY2017).

As a result, we expect that, over the years 2016 to 2021, EBITDA margins in Aviation will fall from over 60% in 2016 to around 50% in 2017 and then to around 40% in 2018, after which higher revenues, improved revenue mix and more stable indirect costs start to deliver a return to 2016 margins in Aviation.

Cash capex decreased by $3.4m in the third quarter, as a result of a decrease of around $14m in capex relating to the S-band satellite, which was launched in Q2 2017. This offset growth of around $10m in success-based capex in relation to GX equipment installations for Deutsche Lufthansa Group.

Enterprise

Enterprise delivered a slight increase in revenues in the third quarter, despite the on-going market pressure on its core products that we expect to continue.

Revenue in our Broadband Global Area Network ("BGAN") product increased by 16.1% to $8.5m in the third quarter, whilst GSPS terminal sales and airtime revenues were up 17.9% to $11.2m with an increase in the number of connected terminals to over 175,000 by the end of the quarter. Revenue growth delivered by both product lines mainly related to the impact of hurricane-related activity during the period. Given the short term nature of this activity, the increase in revenue for these products in the period will not be sustained going forward.

Fixed-to-mobile revenues decreased by 28.3% to $4.2m in the third quarter reflecting a continued decline of satellite-based voice products, partly driven by an on-going migration to Voice-over-IP.

Machine to Machine ("M2M") revenue increased by 9.8% to $4.6m in the third quarter, with the number of connected M2M terminals increasing to over 347,000 by the end of the period.

Direct costs in Q3 2017 increased by $1.6m, 27.6%, as a result of a change in revenue mix, whilst indirect costs were reduced by $0.8m, 16.0%, reflecting a transfer of personnel to the centre. EBITDA was $0.2m (0.7%) lower in Q3 2017, whilst EBITDA margin declined to 69.6%, from 71.3% in the prior year.

Central Services

Revenue from Ligado Networks ("Ligado") for the quarter ended 30 September 2017 decreased by $3.6m, (10.1%), caused by the cessation of supplementary payments relating to original extension of the spectrum option period. Ligado revenue in the period includes $3.9m of deferred revenue released to reflect the economic cost of the revenue deferral arising under the revised transition agreement. There have been no other developments in respect of this agreement in the period. At 30 September we held $186.1m of deferred revenue on the balance sheet in respect of expected costs of implementation of this agreement.

Indirect costs increased by $12.5m in the quarter, due to higher underlying central operational delivery costs of $8.0m, relating to investments in the GX network and our operational capabilities including Cyber and IT. In addition, there were $2.0m of costs which were previously in Maritime, as well as the cost of a $2.5m revaluation of our non-USD liabilities, as the USD weakened at the end of Q3 2017.

We continue to expect a higher level of central operational delivery costs, reflecting not only the impact of the new GX related ground infrastructure being implemented but also increased investment in both IT and cyber security capabilities across the organisation, with the growth in central operational delivery costs in 2018 expected to be in the single digits, in percentage terms.

Central Services capital expenditure in the quarter decreased by $1.3m. There was further expenditure on GX, including initial investment in the design and build programme for the 5th GX satellite and I-6 satellite infrastructure in the period, as well as further investment in organisational capability. This was offset by investment in the I-5 F4 satellite and ground infrastructure in the prior year.

Reconciliation of EBITDA to Profit after tax

Operating profit

Depreciation and amortisation for the quarter ended 30 September 2017 increased by $14.5m as a result of increased capital expenditure.

As a result of the factors discussed above, operating profit for the quarter ended 30 September 2017 decreased by $32.0m (27.1%), compared with the same period in 2016.

Net financing cost

Net financing costs for the quarter ended 30 September 2017 decreased by $101.9m to become net financing income of $36.3m. This includes to a non-cash gain of $56.4m (Q3 2016: charge of $10.6m) in the quarter related to a decrease in the unrealised conversion liability of the new convertible bonds. This was driven by a reduction in the bond price during the third quarter of 2017 (see note 7 of this announcement for more details). The cumulative pre-tax non-cash charge to date of $44.6m will reverse to nil if the convertible bonds reach maturity and are not converted.

Excluding this non-cash charge, net financing costs for the quarter ended 30 September 2017 were $20.1m, a decrease of $34.9m from the same period last year, mainly due to the $32.8m pre-tax one-off cost on redemption of the 2017 convertible bonds recognised in September 2016.

Taxation

The tax charge for the third quarter of 2017 was $10.4m, an increase of $11.8m compared with a tax credit of $1.4m in the same period of 2016. The tax credit in 2016 was largely driven by a credit arising on the revaluation of the Group's deferred tax liabilities, arising from the reduction in the UK corporation tax rate from 18% to 17% in 2020. No further rate reductions have been enacted in 2017 meaning that an equivalent revaluation of the Group's deferred tax liabilities was not required in the quarter.

The effective tax rate for the quarter was 8.5% (Q3 2016: (2.7)%), as a result of the impact of the unrealised conversion liability of the convertible bonds. This amount is non-deductible for tax purposes, in line with UK Tax legislation on derivative instruments. In 2016, the effective tax rate was also impacted by the revaluation of the deferred tax liabilities discussed above.

The underlying effective tax rate for the quarter (after removing the impact of the unrealised conversion liability of the convertible bonds and the revaluation of deferred tax liabilities) was 16.5% (Q3 2016: 16.9%), as a result of a variance in the levels of profitability in jurisdictions where the statutory tax rate is different to the UK and the effect of the Patent Box regime in the UK secured in earlier this year which results in some profits being taxed at 10%, rather than the statutory rate of 19.25%.

The Group maintains tax provisions in respect of ongoing enquiries with tax authorities. In the event all such enquiries were settled as currently provided for, we estimate that the Group would incur a cash tax outflow of approximately $90m, excluding interest, in 2018. The enquiries remain ongoing at this time.

Earnings per share

Basic and diluted earnings per share for profit attributable to the equity holders of the Company were both 25 cents for the quarter, compared to 12 cents in 2016. Adjusted basic and diluted earnings per share, which excludes the non-cash, pre-tax impact of the change in the fair value of the conversion liability component of the 2023 Convertible Bonds and the non-cash, post-tax impact of the loss on redemption of the 2017 Convertible bonds, were both 12 cents, compared to 20 cents in 2016.  

Cash Flow

Cash flow outlined in this table is non-statutory.

1 Net borrowings includes the convertible bond, total borrowings less cash and cash equivalents and short term investments. Borrowings exclude accrued interest and any derivative liabilities.

2 Non-cash movements relate to the amortisation of deferred financing costs.

During the quarter, free cash flow decreased by $8.3m, mainly due to lower cash generated from operations ($10.7m) and higher cash interest paid ($6.4m) as a result of the refinancing in Q3 2016, partially offset by a decrease in cash tax paid of $6.1m due to recovery of a prior year overpayment of corporation tax.

Capital Expenditure

1 "Major infrastructure projects" capex consists of satellite design, build and launch costs and ground network infrastructure costs.

2 "Success-based capex" consists of capital equipment installed on ships, aircraft and other customer platforms.

3 "Other capex" investment primarily includes infrastructure maintenance, IT and capitalised product and service development costs.

4 Cash capital expenditure is the cash flow relating to tangible and intangible asset additions, it includes capitalised labour costs and excludes capitalised interest.

The moderate increase in major infrastructure projects capital investment in the quarter relates to continued investment in the GX and I-6 satellite infrastructures.

Success-based capex in the period principally related to an increase in expenditure for the installation of GX terminals in Aviation and VSAT terminals, in particular Fleet Xpress, in Maritime.

"Other capex" investment also increased during the period, driven by further investment in infrastructure maintenance, IT and capitalised product and service development costs.

Group Liquidity and Capital Resources

At 30 September 2017, the Group had cash and cash equivalents of $347.3m and available but undrawn borrowing facilities of $578.9m under our Senior Credit Facility and the 2014 Ex-Im Bank Facility.

PRINCIPAL RISKS AND UNCERTAINTIES

As outlined in our 2016 Annual Report, the Group faces a number of risks and uncertainties that may adversely affect our business, operations, liquidity, financial position or future performance, not all of which are wholly within our control. Although many of the risks and uncertainties influencing our performance are macroeconomic and likely to affect the performance of businesses generally, others are particular to our operations in mobile satellite services.

RELATED PARTY TRANSACTIONS

There have been no material changes in the related party transactions described on page 156 of the 2016 Inmarsat plc Annual Report and Accounts.

Inmarsat plc

99 City Road

London EC1Y 1AX

By order of the Board,

Rupert Pearce Tony Bates

Chief Executive Officer Chief Financial Officer

9 November 2017 9 November 2017

INMARSAT PLC

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

For the nine months ended 30 September 2017 (unaudited)

1 The change in fair value of derivatives relates to the mark-to-market valuation of the conversion liability component of the convertible bonds due 2023 that were issued in Q3 2016.

2 Non-controlling interest ("NCI") refers to the Group's 51% shareholding in Inmarsat Solutions ehf.

3 Adjusted earnings per share excludes the non-cash impact of the unrealised movement in the fair value of the conversion liability of the 2023 Convertible Bonds and the loss on redemption of the 2017 Convertible Bonds. The year to date charge of $15.8m (2016: $10.6m) is shown above and in net financing costs in Note 4.

INMARSAT PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the nine months ended 30 September 2017 (unaudited)

INMARSAT PLC

CONDENSED CONSOLIDATED INTERIM BALANCE SHEET

1 Cash and cash on deposit with maturity of less than 3 months.

2 Short-term deposits are cash held on deposit with a maturity of between 3 and 12 months.

INMARSAT PLC

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the nine months ended 30 September 2017 (unaudited)

1 The 'other' reserve relates to ordinary shares held by the Employee Share Trust debit of $2.4m (2016: $2.4m debit), the currency reserve debit of $0.7m (2016: debit $0.9m) and the revaluation reserve of $0.6m (2016: $0.6m).

2 Represents the fair value of share option awards recognised in the period.

3 The consideration paid on early repurchase of the 2017 Convertible Bonds has been allocated to the liability and equity components of the instrument consistent with the method used in the original allocation. This resulted in a charge to the equity reserve of $8.1m with the closing balance of the equity reserve of $48.8m transferred to retained earnings.

4 Issue of share capital relates to the issue of shares by the company under its employee share schemes.

5 Non-controlling interest ("NCI") refers to the Group's 51% shareholding in Inmarsat Solutions ehf.

6 Represents the cash value of the scrip dividend reinvested into the Company.

INMARSAT PLC

CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT

For the three and nine months ended 30 September 2017 (unaudited)

1 Gross issuance proceeds of convertible Bonds due 2023 and Senior Notes due 2024.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. General information

Inmarsat plc ('the Company' or, together with its subsidiaries, 'the Group') is a company incorporated in the United Kingdom and registered in England and Wales.

2. Principal accounting policies

Basis of preparation 

The condensed consolidated interim financial statements for the quarter ended 30 September 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. They were approved by the Board of Directors on 9 November 2017. The same accounting policies and methods of computation are followed in the interim statements as in the most recent annual financial statements, at 31 December 2016.

The financial information presented in this release does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2016 were approved by the Board of Directors on 8 March 2017. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

Going Concern

The Group has a robust and resilient business model, strong free cash flow generation and is compliant with all banking covenants. Because of this, the Directors believe that the Company and the Group are well placed to manage their business risks successfully. After considering current financial projections and facilities available and after making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, Inmarsat plc continues to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

Basis of accounting

The functional currency of the Company and most of the Group's subsidiaries and the presentation currency is the US Dollar, as the majority of receipts from operational transactions and borrowings are denominated in US Dollars.

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the period. Although these estimates are based on management's best estimate of the amount, event or actions, the actual results may ultimately differ from these estimates.

3. Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker to allocate resources and assess the performance of the Group. The Group's operating segments are aligned to five market-facing business units, being:

· Maritime, focusing on worldwide commercial maritime services;

· Enterprise, focusing on worldwide energy, industry, media, carriers, and M2M services;

· Aviation, focusing on commercial IFC, business and general aviation services;

· US Government, focusing on US civil and military government services; and

· Global Government, focusing on worldwide civil and military government services.

3. Segment information (continued)

These five business units are supported by 'Central Services' which include satellite operations and backbone infrastructure, corporate administrative costs, and any income that is not directly attributable to a business unit such as Ligado Networks. The Group has aggregated the US Government and Global Government operating segments into one reporting segment, as the segments meet the criteria for aggregation under IFRS. Therefore, the Group's reportable segments are Maritime, Government, Enterprise, Aviation and Central Services. The accounting policies of the operating segments are the same as the Group's accounting policies described in note 2. Segment results are assessed at the EBITDA level without the allocation of central costs, depreciation, net financing costs and taxation.

1 Central Services includes revenue and EBITDA from Ligado.

2 Cash capital expenditure is the cash flow relating to tangible and intangible asset additions, it includes capitalised labour costs and excludes capitalised interest.

3 Cash flow timing represents the difference between accrued capex and the actual cash flows.

4. Net financing costs

5. Taxation

6. Net Borrowings

These balances are shown net of unamortised deferred finance costs, which have been allocated as follows:

For further details of the Group's debt structure please refer to note 19 of the 2016 Annual Report.

7. Fair value of financial instruments

The Group's derivative financial instruments consist of forward foreign currency contracts which are primarily designated as cash flow hedges and the conversion liability component of the Convertible Bonds due 2023. The Group has no financial instruments with fair values that are determined by reference to significant unobservable inputs i.e. those that would be classified as level 3 in the fair value hierarchy, nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

The fair values at the Balance Sheet date were:

The fair values of forward foreign exchange contracts are based on the difference between the contract amount at the current forward rate at each period end and the contract amount at the contract rate, discounted at a variable risk-free rate at the period end.

On issuance the Convertible Bond 2023 was bifurcated between a cash debt and conversion liability component, as shown below. The cash debt component meets the definition of net borrowings and over the term of the bond will accrete up to the principal value of $650m with the cost of that accretion recognised in net financing costs. The conversion liability component represents the value of the conversion rights associated with the instrument and is accounted for at fair value through profit and loss.

The fair value of the conversion liability is calculated as the difference between the fair value of the Convertible Bond (being the principal multiplied by the closing bond price at the Balance Sheet date) and the accreted balance of the cash debt component. At 30 September 2017, the fair value of the Convertible Bond was $707.6m and the accreted balance of the cash debt component was $558.4m, meaning the conversion liability was valued at $149.2m. As shown in the table below, the movement in the conversion liability from December 2016 to 30 September 2017 of $15.8m has been recognised in the income statement through net financing costs:

The Group has no financial instruments with fair values that are determined by reference to significant unobservable inputs i.e. those that would be classified as level 3 in the fair value hierarchy, nor have there been any transfers of assets or liabilities between levels of the fair value hierarchy. There are no non-recurring fair value measurements.

Except as detailed in the following table, the Directors consider that the carrying value of non-derivative financial assets and liabilities approximately equal to their fair values.

8. Dividends

The Board declared, and on 20 October 2017 paid, an interim dividend of 21.62 cents ($) per ordinary share to ordinary shareholders on the share register at the close of business on 15 September 2017. Dividend payments were made in Pounds Sterling based on the exchange rate from the WMReuters GBP/USD 9am fix (London time) four business days prior to the date of announcement of the scrip reference price. In accordance with IAS 10, this dividend has not been recorded as a liability at 30 September 2017.

With effect from the 2016 interim dividend, we introduced a scrip dividend election opportunity for shareholders, to take their cash dividend entitlement in Inmarsat shares. For our 2017 interim dividend the scrip amounted to 1,617,973 new shares (0.35% of the then issued share capital). These shares were issued and made available for trading on 20 October 2017. As at 20 October 2017, Inmarsat plc had 456,039,919 shares in issue.

9. Earnings per share

Earnings per share for the three and nine months ended 30 September 2017 has been calculated based on the profit attributable to equity holders for the period and the weighted average number of ordinary shares in issue (excluding shares held by the Employee Benefit Trust).

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options and awards granted to employees under the employee share plans.

10. Adjusted earnings per share

Adjusted earnings per share for the half year ended 30 September 2017 has been calculated based on profit attributable to equity holders adjusted for the pre-tax impact of the change in the fair value of the conversion liability component of the 2023 Convertible Bonds and the post-tax impact of the loss on redemption of the 2017 Convertible bonds.

11. Contingent liabilities

The Group is subject to periodic legal claims in the ordinary course of its business, none of which is expected to have a material impact on the Group's financial position. There have been no material changes to the Group's contingent liabilities from those reported in the financial statements for the year ended 31 December 2016.

12. Events after the balance sheet date

There have been no material events since the balance sheet date.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm to the best of their knowledge that:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34, "Interim Financial Reporting"

(b) the interim management report includes a fair review of the information required by Disclosure and Transparency Rule ('DTR') 4.2.7R, being an indication of important events during the first nine months and description of principal risks and uncertainties for the remaining three months of the year; and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R, being the disclosure of related parties' transactions and changes therein.

The Directors of Inmarsat plc are listed on our website at www.inmarsat.com.

By order of the Board,

Rupert Pearce Tony Bates

Chief Executive Officer Chief Financial Officer

9 November 2017 9 November 2017