6th May 2008 12:11
Inmarsat PLC06 May 2008 6 May 2008 Inmarsat plc Andrew Sukawaty, Chairman & Chief Executive Officer - Speech given toShareholders at the Company's Annual General Meeting held on 6 May 2008 Good morning Ladies and Gentlemen. It is now 10.00am and it's time to start theproceedings. I offer a very warm welcome to all of you to today's annual generalmeeting. This is our third AGM as a listed company. During 2007 I am delighted to confirmthat we continued to deliver on the target we set out at our IPO in June 2005 toaccelerate and increase revenues whilst maintaining strong growth in operatingcash flows. I will talk shortly about our activities during 2007, but first I'd like tointroduce you to the members of your board. I am joined today by my board colleagues - John Rennocks, our Deputy Chairman and senior independent non-executivedirector. John is also Chairman of our Audit Committee; Sir Bryan Carsberg and Stephen Davidson, both independent non-executivedirectors. Stephen is our Remuneration Committee Chairman; Retired Admiral James Ellis Jr, and Kathleen Flaherty, also both independentnon-executive directors. Both Rick Medlock, who is Inmarsat's Chief Financial Officer, and MichaelButler, our President and Chief Operating Officer, are with us, along with AlisonHorrocks, our Company Secretary. Stephen Davidson, Sir Bryan and I are standing for re-appointment this year. Ashort summary of our experience will be provided when we get to the formalresolutions for the re-elections. One of the resolutions shareholders are being asked to approve today relates tothe Remuneration Report. We have provided full information in the report aboutthe Company's remuneration policies and how this is set for the executivedirectors. We have also provided details of all the incentive plans we operatefor senior management and staff. We believe that the Company's policies ensurewe retain the highest calibre of staff and have effective reward systems inplace which are performance based. Our staff are talented and we value theirexperience and dedication to the Company. I believe that your board collectively possesses all of the necessary range ofqualities and experience to oversee the Company effectively. Charged withachieving the Company's goals are an experienced and motivated management team. Before I provide an overview of how our business performed in 2007, I wanted tocomment on the transaction we completed in December. An Inmarsat groupsubsidiary company provided a loan to one of the Communications InvestmentPartner's group of companies to enable them to purchase Stratos GlobalCorporation, our largest distributor. We, as part of this transaction, receivedan option to purchase Stratos in 2009 when the restrictions on our directownership of distribution partners expires. To follow applicable accountingstandards, we consolidated the results of the CIP group, including Stratos, intoour 2007 Inmarsat plc annual accounts for the period 11 to 31 December 2007. Iwant to highlight that we have no control over Stratos until such time as theoption is exercised. We will make a final decision on the exercise of thisoption in due course, but we do expect to exercise the option. Our relationship with our distribution partners is vital to the ongoing successof our business and we believe a partnership approach is key to achieving this.While we have the option indirectly to acquire our largest distributor in thefuture this should not confuse the fact that, we remain committed to workingclosely with all of our distribution partners for the long term. Our existingdistribution agreements expire in April 2009 and we have already provided ourdistributors with new agreements which are updated to provide new commercialarrangements for the provision of our services in the future. We will be workingclosely with our partners to finalise these new agreements in readiness forimplementation on 15 April 2009. To be clear, the financial information I refer to today in respect of the 2007year, is for the Inmarsat Core business, which excludes results for CIP/Stratos. It is nearly three years since Inmarsat successfully listed on the London StockExchange. In 2007, our revenue growth continued to be driven by solidperformances across our business sectors where we saw strong revenue growth fromour land based broadband service BGAN, our aero service Swift 64 and our Fleetmaritime service. During the year we launched six new services as well ascompleting the CIP transaction which I've just highlighted. We also successfullyissued a convertible bond, the proceeds from which were used to fund the loan toCIP for it to acquire the Stratos business. This we did in the face of a badcredit market but it served to reduce our cost to fund the transaction. We alsoreached agreement with Mobile Satellite Ventures, or MSV, one of our competitorsover the Americas, to co-operate in a multi-year programme that wouldreconfigure our radio spectrum in a way that allows us both to pursue anexciting emerging opportunity in the US and Canada, for a hybrid satelliteterrestrial wireless system, while preserving spectrum alongside it for ourglobal mobile services. Our plans to launch our third Inmarsat-4 satellite have been put back a littlefollowing the Proton launch failure in March this year. We expect that we willstill be able to launch the satellite in 2008 and will announce when we have afirm launch date agreed. The progress on constructing our third ground stationin Hawaii is well underway. This ground station will transmit and receive ourBGAN and other traffic to and from our satellite network. The third Inmarsat-4satellite will fill out the small remaining Pacific gap in our global coveragefor our broadband services and satellite phone services. I mentioned earlier that we had six service launches during 2007. Two of ourmost significant were FleetBroadband for maritime users and SwiftBroadband forthe aeronautical sector. Both these services use the same network capability asour BGAN service for land, which provides simultaneous voice and high-speed datacapabilitites at sea and in the air. Several customers are already undertakingtrials of the new FleetBroadband service and have provided very positivefeedback as to its speed and enhanced capabilitites. We also understand that themajority of new long-haul aircraft currently being built by Boeing and Airbuswill be fitted with antennae capable of accessing SwiftBroadband which is astrong endorsement of the value of this new service to users. We also launchedfurther satellite phone services: FleetPhone for maritime users and theIsatPhone for the land mobile sector. Our plans for a global satellite phoneservice continue, with the launch planned for 2009. Our existing satellite phoneservices are already available across most of Africa, Asia and the Middle East. We have also secured the position as the commercial partner of the Alphasatproject for the development of a new satellite operating in L-band spectrum,where our existing satellites operate. This new satellite will be complementaryto our existing Inmarsat-4 constellation. Alphasat originated as a EuropeanSpace Agency project. Providing a significant public subsidy for the developmentof a new satellite, this is an opportunity for Inmarsat to participate in amajor European initiative and we look forward to working with our partnersAstrium, ESA and our other government partners on this satellite programme. With our growth in top line revenues and EBITDA performance during 2007, we havebeen able to increase our dividend payments. Your board has proposed a finaldividend of 17.33 cents (US$) per share, making a full year dividend of 28.88cents (US$). This represents an increase of 8.3% over 2006 and is in line withour policy of building sustainable cash returns to our shareholders. The finaldividend, if shareholders approve the resolution at today's AGM, will be paid on23rd May to shareholders on the share register at 9th May. Now I would like to take a moment to highlight some core and critical aspects ofour operations. Our customers use Inmarsat for mission critical servicesglobally, at times in the most extreme environments on our planet. Whether it'slife saving services at sea, humanitarian efforts in war zones on land or vitalcommunication services while airborne, they depend on Inmarsat services to bethere when they need them. This is an obligation which we take extremelyseriously at Inmarsat. It not only drives our service quality levels andreliability, it also drives our push into broadband services, allowing ourcustomers to access the same services in the same way, wherever they goglobally. We remain committed to the maritime community, and are still the onlyprovider of satellite communications services for the Global Mobile Distress andSafety System, known as GMDSS. Revenues for the Inmarsat Core business for 2007 were US$557.2m, an increase ofUS$57.1m, or 11.4% compared with 2006. We maintained careful cost controlthroughout the year with only minimal increases. With our strong revenue growthand well controlled costs, our EBITDA, or earnings before interest, tax,depreciation and amortisation, increased by 16% to US$383.5m. Our EBITDA marginwas higher in 2007 than in 2006, at 69%. This increase in revenues shows that weare well on track to deliver and possibly exceed the growth rates we hadtargeted at the time of the IPO in 2005, and demonstrates that our business isby and large a fixed cost base and is highly leverageable... in other words, asrevenues grow we see margin expansion and disproportionate operating profitgrowth. Data revenues in the maritime sector for 2007 increased by 13%, driven byincreased usage of our Fleet services. Our Fleet voice service and newFleetPhone service are starting to have a positive impact on stabilising thereduction in revenue from voice calls and we hope that these services willincrease the level of voice revenue in future. We are also delighted once againto be acting as the official provider of satellite communications for theround-the-world Volvo Ocean Race for the 2008/2009 Race, which will kick offfrom Spain in October this year. Data revenues in the land mobile sector increased 14.6% reflecting continuedstrong growth in our BGAN services. Although we've noticed a decline in theconcentrated high-speed data traffic in the Middle East, we are seeing goodsigns of more diversified growth in the use of BGAN across a significant numberof countries, some where we previously had little or no traffic. BGAN revenuesduring 2007 reflected a significant increase over 2006, which was the first fullyear of our BGAN service. In line with our expectation, we are seeing somemigration to BGAN from our R-BGAN service, which closes at the end of this year,and our GAN service. Our voice service capability is served through BGAN andalso the IsatPhone which competes in terms of form and price against products ofother MSS operators. We expect our market share of voice business to increase asthe geographic coverage increases and these voice services become more embeddedwith users, especially as the satellite constellations for some of the existingMSS operators may be coming to the end of their lives over the next few years.We expect the IsatPhone to become more widely used once the globalised versionof the phone is available in 2009. Our Swift 64 aeronautical service helped to boost our aero revenues by 44% in2007 and we also saw continued growth in our classic aeronautical services. Weare excited about the developing application of in-flight use of mobile phonesand other communciations devices such as PDAs and Blackberrys which are beingimplemented by our distribution partners and more airlines have signedagreements to explore in-flight mobile connectivity. The Regulatory hurdles arebeing overcome, the equipment is being certified by aircraft type and theairlines are dealing with the social aspects for the use on planes. Before I pass onto the formal business, I'd like to make my concluding comments.The results for our US reporting entities for the first quarter of 2008 will bepublished on 8th May. They will be available on our website for you to download.As these will be issued shortly, I'm not able to provide any specific commentson the first quarter's results at today's meeting. Your board is very pleased with the Company's performance in 2007 - we againshowed growth across all sectors. Our BGAN service is now becoming acceptedacross different customers, in new markets and is being recognised as aworld-class communications tool. We believe that the successful, new service launches during 2007, adding to ourexisting portfolio of services, will bring added market penetration andcontinued leadership by us in the MSS sector for many years to come. Alongside managing a successful and ambitious business, we know we mustcontinually look at how we can invest to improve our service and manage ourbusiness to keep innovation and development at the forefront of our thinking.All of this targeted at maintaining our leadership position. The launch of ourthird Inmarsat-4 satellite and operation of our new ground network are keyelements of our forward planning. Their reality will provide global operationson the Inmarsat-4 satellites for our BGAN and satellite phone services. As thecommercial partner for the Alphasat project, we will be engaged in many years ofplanning to benefit from the technology of a further sophisticated satellite. We believe we are well positioned to deliver another year of growth in 2008, andto build on the investments we have now made to the benefit of our customers,partners and shareholders. Thank you for your investment in Inmarsat. We look forward to continued growth in our business in 2008 and beyond. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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