8th May 2007 11:11
Inmarsat PLC08 May 2007 8 May 2007 Inmarsat plc Andrew Sukawaty, Chairman & Chief Executive Officer - Speech given toShareholders at the Company's Annual General Meeting held on 8 May 2007 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 second AGM as a listed company. In 2006 I am delighted to confirmthat we delivered on the target we set out in June 2005 when we listed on theLondon Stock Exchange which was to increase revenues whilst maintaining stronggrowth in operating cash flows. I will talk shortly about our activities during 2006, but first I'd like tointroduce you to 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 independent,non-executive directors. We were pleased to have Kathleen join our board lastyear. Both Rick Medlock, who is Inmarsat's Chief Financial Officer and Michael Butler,our President and Chief Operating Officer, are with us, along with AlisonHorrocks, our company secretary. John Rennocks and Rick Medlock are standing for re-appointment this year andKathleen Flaherty will be standing for appointment. I will provide you with ashort summary of their experience when we get to the formal resolutions to electthem. 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 the incentive plans in place for allstaff. We believe that the Company's policies ensure we retain the highestcalibre of staff and have effective reward systems in place which areperformance based. Our staff are talented and we value their experience anddedication to the company. I believe that your board collectively possesses all of the necessary range ofqualities and experience to lead the company effectively. They are supported inachieving this by an experienced management team. I'd like to give you an overview now of how our business performed in 2006. It is nearly two years since Inmarsat successfully listed on the London StockExchange. In 2006 our revenue growth has continued to be driven by solidperformances across our business sectors and by the fast growing contributionfrom our new broadband service, which we call BGAN. With our growth in top line revenues and EBITDA performance during 2006, we havebeen able to increase our dividend payments. Your board has proposed a finaldividend of 16 cents (US$) per share, making a full year dividend of 26.66 cents(US$). This represents an increase of 4.1% over 2005. At the time of the IPO wesaid we wanted to target dividend growth in line with growth of our normalisedfree cash flow. Continuing our strong operating performance in future will helpus deliver this for shareholders. The final dividend, if shareholders approvethe resolution at today's AGM, will be paid on 25th May to shareholders on theshare register at 11th May. I am pleased to report that during 2006 we saw several key strategic initiativesstarted which will have an increasing impact during 2007. These are theannouncement of our intention to enter the mobile satellite handheld market, ourcommitment to launch the third Inmarsat-4 satellite and the focus on our newbroadband service for the land mobile market and its further development for usein the maritime and aeronautical sectors. On 19th March this year, one of our subsidiary companies, Inmarsat Finance IIILtd agreed to provide a loan of up to US$250m to CIP UK Holdings Ltd to fund theacquisition of Stratos Global Corporation by CIP Canada Investment Inc which isultimately owned by Communications Investment Partners Limited. Stratos Globalis our largest distributor today with approximately 45% of our Mobile SatelliteServices revenue. The Board of Directors of Stratos has unanimously agreed torecommend CIP Canada's offer and the loan by Inmarsat Finance III to CIP UK willbe subject to the closing of the transaction. Inmarsat Finance III has obtaineda call option to acquire 100% of CIP UK, which will own Stratos, which is notexercisable prior to April 2009, which is when our existing distributionarrangements will expire. As I stated at the time we announced this strategic initiative, an option toshape and contribute directly to the development of our distribution from 2009is one that your board and management team believe can effectively balance thelong-term interests of our shareholders, our distribution partners and, mostimportantly, the end customers for our services. It has long been central to our business strategy to maintain efficientdistribution of our services, and we have strived to balance the needs forhealthy competition with a profitable business opportunity for distributionpartners. The CIP/Stratos transaction does not change this. In fact, it shouldunderline to our partners that we have a strong desire to maintain diversity ofchoice for customers and ensure a sustainable future for all distributionpartners. Now I would like to take a moment to highlight some features of our operations.Our services continue to be relied upon in situations where other networks donot exist or cannot service the customer due to limitations of their service ordue to the fact that our systems work the same way globally. Our customers useus on a daily basis for business critical communications and in emergencies, forexample for life-saving incidents at sea. We remain committed to the maritimecommunity, and are still the only provider of satellite communications servicesfor the Global Mobile Distress and Safety System, known as GMDSS. In 2006 we saw our MSS revenues grow on an underlying basis by around 5.5% over2005 with strong contributions from our Fleet and Swift 64 services which areused in the maritime and aeronautical sectors respectively. Our BGAN service,which combines data access at broadband speeds with a simultaneous voicecapability, has been our fastest growing service over the first year ofintroduction with usage in more than 175 countries. With our BGAN service, wereceive subscription revenues per terminal, which provides a regular revenueflow. We have already seen different usage patterns developing, depending uponsituational use and whether multiple users are accessing their data/voicerequirements using one terminal, or there is just a single user. Before thestart of the AGM I hope you had chance to have a look at the different BGANterminals which are available - technology has advanced so much over recentyears and it is quite remarkable that we can now communicate securely andefficiently at broadband data speeds through these small terminals. Over 70% of our revenues come from data usage from our "on-demand" services andwe believe there is a growing market for the Inmarsat partnership to deliverbroadband data services to new and existing users. The broadband speedcapability of our new FleetBroadband and SwiftBroadband services will allowusers to operate even more cost effectively, increasing time efficiency. Our two Inmarsat-4 satellites, which were both launched in 2005, are carryingoperational traffic and between them cover approximately 98% of the world'spopulation across 85% of the world's landmass. As announced at the time of ourpreliminary results in February, we have exercised an option with LockheedMartin for a launch vehicle to launch the third Inmarsat-4 satellite. This isalready built and has been fully tested. On the basis of the current launchmanifest with Lockheed Martin, we have a launch period allocation in mid-2009,but we have requested an accelerated launch under the contract and arecontinuing to explore all options for an earlier launch. Now that we havedecided to launch the third satellite, we have committed to build an additionalSatellite Access Station in Hawaii. The successful launch of the thirdInmarsat-4 satellite will allow increased coverage for our broadband and newhandheld services and this has been welcomed by our partners and customers. At last year's AGM I highlighted that we were looking at opportunities to enterthe handheld satellite market. In September last year, we agreed a collaborationarrangement with ACeS International Ltd to offer low-cost handheld and fixedvoice services, initially in the Asian market with extended coveragesubsequently using the Inmarsat-4 satellites. We are planning to launch theISATphone this year which will have a coverage area over the Inmarsat-4 F1satellite covering much Africa, Asia and the Middle East. This handheld offering complements our portfolio allowing us to offer customersa complete range of mobile satellite services. It positions us to offer users aguarantee of service continuity beyond the end of the next decade using theInmarsat-4 satellites. At the end of 2008, we expect to offer our handheldservice on a global basis across our Inmarsat-4 satellite constellation using afully modernised ground network and introducing a next generation set of userterminals. Aero passenger connectivity remains an area which is being trialled by ourpartners and we are excited about the future opportunities this too may bring. Turning to operating costs, we remain very focused on cost control and in 2006we maintained tight control of costs, with overall lower net operating costs.During 2006, we implemented organisational changes to reflect the fact that theInmarsat-4 programme was nearing completion. The redundancy and restructuringcosts associated with this were US$6.8m which was recognised as an expense in2006. We expect annualised savings of approximately US$8.7m. Maintaining awatchful eye over our cost base remains ever important for the management team. Before I pass onto the formal business, I'd like to make my concluding comments.Our results for the first quarter of 2007 will be published on 14th May and willbe available on our website for you to download. As such, I'm not able toprovide any specific comments on these at today's meeting. We had a solid performance in our core business during 2006 and we are verypleased that we are delivering on our strategic objectives. We remain excitedabout the future opportunities to expand our BGAN service and the forthcominglaunches later in 2007 of our FleetBroadband and SwiftBroadband services. Wecontinue to believe that our broadband offerings will drive demand for ourservices well into the future. We are working closely with our partners todevelop broadband opportunities for government users and this remains a focusfor 2007. We have the opportunity with our handheld satellite service to develop a newincremental revenue stream which will allow us to be competitive in anestablished and growing market. We look forward to the launch of this serviceduring 2007. We are pleased with the performance of our core business and believe the growthdrivers of our 2006 performance can fuel further growth in 2007. We aretargeting growth across all our business sectors in 2007 and overall a higherlevel of revenue growth than we achieved in 2006. Thank you for your investment in Inmarsat. We are focused on meeting therequirements of our shareholders, customers and staff in a targeted way,fulfilling specific objectives for each. We look forward to continued growth in our business in 2007 and beyond. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Inmarsat