9th Mar 2006 07:00
Inmarsat PLC09 March 2006 Inmarsat plc Reports Preliminary Full Year Results 2005 London, UK: 9 March 2006. Inmarsat plc, the leading provider of global mobilesatellite communications services, today reported unaudited consolidatedfinancial results for the year ended 31 December 2005. 2005 Highlights • MSS revenue up 3% to $472.5 million (2004: $458.9 million) • EBITDA up 5% to $317.1 million (2004: $301.7 million) • Inmarsat-4 satellite deployment completed with two successful launches • Start of commercial BGAN services in December 2005 • Successful IPO and capital structure changes implemented • Final dividend proposed of 10.95 cents (US$) per share Andrew Sukawaty, Inmarsat's Chairman and Chief Executive Officer said, "It was astrong finish to a transformational year. We are pleased with our solidfinancial performance and significant operational achievements in 2005. With thesuccessful launch of two Inmarsat-4 satellites we have added significant lifeand new capacity to our network and enabled the introduction of BGAN services(Broadband Global Area Network), a global DSL-like offering. With these stepsnow behind us we are entering 2006 with confidence and believe strongly in thediverse growth opportunities for our business." -------------------------------------------------------------------------------- Full Year Growth -------------------US$m (except per share data) 2005 2004 %----------------- ------------ ---------- ----------Total Revenue 491.1* 480.7 2%EBITDA 317.1 301.7 5% ------------ ---------- ----------Profit before tax 95.5 24.9 284% ============ ========== ==========EPS (diluted) 0.17-------------------------------------------------------------------------------- * Includes revenue contribution from subsidiaries disposed of during the year.These subsidiaries contributed a full year of revenue in 2004. Mobile Satellite Services (MSS) The maritime sector was the main driver of our revenue performance in 2005,growing 6% compared with 2004. Continued strong take up of Fleet servicescontributed to growth of almost 13% in maritime data revenues, while our mini-Mand Inmarsat-B maritime services also performed well during the year. Althoughgrowth in maritime data revenues was partially offset by lower maritime voicerevenues, we have made good progress in that the rate of decline in our maritimevoice business continued to slow as the impact of analogue to digital migrationreduced and the success of off-peak promotions generated overall voice trafficgrowth during the year. Our land sector revenues were impacted by a number of factors and thesecontributed to a fall of 9% compared to 2004. Land data revenues decreased by 7%primarily due to a reduction in activity from government and military users inthe Middle East and the impact of reduced pricing for our R-BGAN servicedesigned to stimulate demand in certain areas. During the second half of 2005 wesaw traffic from the Middle East stabilise and traffic growth for our R-BGANservice improve in response to our pricing initiatives. Continued competitionfor voice business from MSS handheld operators contributed to a lower year overyear revenue performance. We are actively pursuing entry into the handheldmarket with our own service. Our aeronautical sector revenue continued to grow rapidly primarily as a resultof increased use of our Swift64 service. Aeronautical revenues grew by 34% overthe prior year. Installations of Swift64 terminals during the first half of theyear contributed to continued revenue growth in the second half of 2005. Ourleasing revenues were up 7% on 2004. A 5-year agreement with the Japanese CivilAviation Authority in the first half, as well as some short term demand duringthe second half as a result of Hurricane Katrina and the earthquake in Pakistancontributed to this performance. At the end of the year our total net external debt stood at $852 million,including $250.0 million of bank debt and overdraft, $336.6 million of SeniorDiscount Notes and $300.4 million of Senior Notes, offset by $35.3 million ofcash and short-term investments. We also had an available but undrawn creditfacility of $300.0 million. Rick Medlock, Chief Financial Officer, commented "2005 was a year of transitionin our business as we laid the foundations for future growth through oursatellite deployments and the launch of BGAN. Through our IPO we have completedthe final step in our development from an intergovernmental organisation to afully-fledged commercial operator. We have achieved these significant milestoneswhile making solid progress in our financial performance. " Inmarsat-4 Programme In November 2005 we successfully launched the second of our Inmarsat-4satellites. Following deployment and testing, the second satellite was broughtinto commercial service in January 2006. The launch of the second Inmarsat-4satellite completes the planned deployment of two Inmarsat-4 satellites. Thefirst Inmarsat-4 satellite was launched in March 2005 and brought intocommercial service in May 2005. We have built a third Inmarsat-4 satellite whichis now fully complete and tested. This satellite is currently being kept instorage as a ground spare. The overall capital cost of the Inmarsat-4 and BGANprogramme is not expected to exceed our $1.5 billion forecast. IPO In June 2005 we successfully completed an initial public offering of ordinaryshares on the London Stock Exchange. We raised over $645 million of net primaryproceeds and used these funds, together with cash on hand, to reduce our debt by$654 million. These debt reductions and the terms of a new senior creditfacility will significantly reduce our interest expense in future periods. Outlook We believe our core business is performing well and is positioned for growth.Our outlook for 2006 is positive. While we expect voice revenues to remain underpressure, particularly in our land sector, we believe the trends in our voicebusiness can contribute to further stabilisation of these revenues in 2006. Weexpect the drivers of growth in our maritime data and aeronautical sectors tocontinue in 2006, although at a reduced rate of growth when compared to 2005.While early feedback on our new BGAN services has been strongly positive, weexpect take up of these services to build gradually through 2006. Our leasingbusiness has been subject to fluctuations in 2005 from short-term leasing demandand we expect this to continue in 2006. We expect our operating costs toincrease in line with the need to operate and insure the satellites of ourInmarsat-4 network. In addition, where the needs of the business are changingfollowing the completion of the Inmarsat-4 programme, we expect to makeappropriate adjustments to our cost base. We expect our cash capitalexpenditures for our Inmarsat-4 programme to be in the region of $150 million in2006. 2005 Results for Inmarsat Holdings Limited and Inmarsat Group Limited Inmarsat Holdings Limited, through its subsidiary Inmarsat Finance II plc, isthe issuer of $450 million of 10.375% Senior Discount Notes due 2012. InmarsatGroup Limited, through its subsidiary Inmarsat Finance plc, is the issuer of$310.4 million of 7.625% Senior Notes due 2012. Inmarsat Holdings Limited andInmarsat Group Limited will report full year 2005 results on Form 20-F andexpect to file these reports with the SEC on or around 28 April 2006.Furthermore, both Inmarsat Holdings and Inmarsat Group expect to notify theTrustee of a change in accounting standard from UK GAAP to IFRS (InternationalFinancial Reporting Standards). To assist analysts and investors in their understanding of the results, thefollowing unaudited financial tables are provided for Inmarsat Holdings Limited,prepared in accordance with UK GAAP. ---------------------------------------------------Inmarsat Holdings Fourth quarter ended Year endedLimited December 31, December 31,Revenue Breakdown(unaudited) --------------------------------------------------- 2005 2004 2005 2004 ---------------------------------------------------Revenues (US$ in millions)Maritime sector:voice services 25.5 25.3 102.0 105.0data services 40.5 37.5 165.1 146.4 ---------------------------------------------------Total maritimesector 66.0 62.8 267.1 251.4Land sector:voice services 5.6 6.2 23.6 27.9data services 21.5 22.2 98.2 105.8 ---------------------------------------------------Total landsector 27.1 28.4 121.8 133.7Aeronauticalsector 6.4 4.7 22.7 16.9Leasing (incl.navigation) 15.8 14.4 60.9 56.9 ---------------------------------------------------Total mobilecommunicationsservices 115.3 110.3 472.5 458.9Subsidiaryrevenues 0.1 4.1 11.9 14.9Other income 2.1 2.4 6.7 6.9 ---------------------------------------------------Total revenue 117.5 116.8 491.1 480.7 =================================================== ---------------------------------------------------Inmarsat Holdings Fourth quarter ended Year ended Limited December 31, December 31,ConsolidatedFinancial Results (unaudited) --------------------------------------------------- 2005 2004 2005 2004 (as restated) (as restated) --------------------------------------------------- (US$ in millions)Staff costs 27.3 23.0 95.7 86.6Network andsatelliteoperations 7.0 14.5 38.8 50.0Other externalcosts 18.5 21.6 62.2 67.6Own workcapitalized (5.1) (8.0) (25.2) (25.8) ---------------------------------------------------Total other netoperating costs 47.7 51.1 171.5 178.4 =================================================== These results will be incorporated into the results reported on Form 20-F underIFRS together with a reconciliation to US GAAP. Other Information A webcast recording of the analyst presentation to be held on 9 March at 9:00amwill be posted to our website after the event. To access the webcast please goto: www.inmarsat.com/investor_relations/. Inmarsat management will also host a conference call on Thursday, 9 March at 3:00pm London time (United States 10:00am EST). To access the call please dial+44 20 8609 0238 and enter the access code 916960#. A recording of the callwill be available for one week. To access the recording please dial +44 20 86090289 and enter the conference reference 138873. Forward-looking Statements Certain statements in this announcement constitute "forward-looking statements"within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.These forward-looking statements involve risks, uncertainties and other factorsthat may cause our actual results, performance or achievements, or industryresults, to be materially different from those projected in the forward-lookingstatements. These factors include: general economic and business conditions;changes in technology; timing or delay in signing, commencement, implementationand performance of programmes, or the delivery of products or services underthem; structural change in the satellite industry; relationships with customers;competition; and ability to attract personnel. You are cautioned not to rely onthese forward-looking statements, which speak only as of the date of thisannouncement. We undertake no obligation to update or revise any forward-lookingstatement to reflect any change in our expectations or any change in events,conditions or circumstances. Contact:Inmarsat plc, London, UK Investor Enquiries Media EnquiriesSimon Ailes, +44 20 7728 1518 Christopher McLaughlin, +44 20 7728 [email protected] [email protected] INMARSAT PLC PRELIMINARY CONSOLIDATED FINANCIAL RESULTS For the year ended 31 December 2005 (unaudited) Forward-Looking Statements This document contains forward-looking statements. These forward-lookingstatements include all matters that are not historical facts. Statementscontaining the words "believe", "expect", "intend", "may", "estimate" or, ineach case, their negative and words of similar meaning are forward-looking. By their nature, forward-looking statements involve risks and uncertaintiesbecause they relate to events that may or may not occur in the future. Wecaution you that forward-looking statements are not guarantees of futureperformance and that our actual financial condition, results of operations andcash flows, and the development of the industry in which we operate, may differmaterially from those made in or suggested by the forward-looking statementscontained in this document. In addition, even if our financial condition,results of operations and cash flows, and the development of the industry inwhich we operate, are consistent with the forward-looking statements in thisdocument, those results or developments may not be indicative of results ordevelopments in subsequent periods. Important facts that could cause our actualresults of operations, financial condition or cash flows, or the development ofthe industry in which we operate, to differ from our current expectationsinclude those risk factors disclosed in our Initial Public Offering Prospectusas filed with the London Stock Exchange on 17 June 2005. As a consequence, our current plans, anticipated actions and future financialcondition, results of operations and cash flows, as well as the anticipateddevelopment of the industry in which we operate, may differ from those expressedin any forward-looking statements made by us or on our behalf. TABLE OF CONTENTS Operating and Financial ReviewConsolidated Income Statement for the year ended 31 December 2005Consolidated Statement of Recognised Income and Expense for the year ended 31December 2005Consolidated Balance Sheet as at 31 December 2005Consolidated Cash Flow Statement for the year ended 31 December 2005Notes to the Consolidated Financial Results Operating and Financial Review The following is a discussion of the unaudited consolidated results ofoperations and financial condition of Inmarsat plc (the "Company" or togetherwith its subsidiaries, the "Group") for the year ended 31 December 2005 (the"Financial Year"). You should read the following discussion together with thewhole of this document including the historical consolidated financial resultsand the notes. The consolidated financial results were prepared in accordancewith International Financial Reporting Standards (IFRS) and IFRICinterpretations issued and effective at the time of this report. Overview Inmarsat is the leading provider of global mobile satellite communicationsservices, providing data and voice connectivity to end-users worldwide.Headquartered in London, Inmarsat has more than twenty-six years' experience indesigning, launching and operating its satellite-based network. With a fleet ofeleven owned and operated geostationary satellites, we provide a wide range ofdata and voice services, including telephony, fax, video, email and high-speedintranet and internet access. The Group's revenues, operating profit and EBITDAunder IFRS for the 2005 Financial Year were $491.1 million, $209.5 million and$317.1 million, respectively. We report our results of operations in US dollars as the majority of ourrevenues and our borrowings are denominated in US dollars. Our results have beenaffected by the higher exchange rates for sterling/dollar. Approximately 60% ofour net operating costs are in sterling. Successful Launch of F1 and F2 Inmarsat-4 Satellites On 11 March 2005 a Lockheed Martin Atlas V rocket successfully launched thefirst of the Inmarsat-4 satellites from Cape Canaveral, Florida, USA. Thesatellite continues to perform in line with management's expectations withcommercial traffic being carried and now supports our new Broadband Global AreaNetwork ("BGAN") service in Europe, Africa, the Middle East and Asia. The second Inmarsat-4 satellite was successfully launched from the Sea LaunchOdyssey platform on 8 November 2005. Now also in commercial service, thesatellite carries Inmarsat's existing services and will be used to carry our newBGAN service in the Americas. Successful launch of Broadband Global Area Network (BGAN) service On 1 December 2005 we successfully launched our BGAN service which provides bothvoice and broadband data simultaneously through a portable device on a globalbasis. Delivered via the Inmarsat-4 satellites, the service is initiallyavailable across Europe, Africa, the Middle East and Asia. It is expected thatnetwork coverage will be extended to North and South America during 2006. Initial Public Offering (IPO) and Admission to the London Stock Exchange The Company listed as a public company on the London Stock Exchange on 22 June2005 raising approximately $670 million of gross primary proceeds on admissionwith the issue of 150 million shares at a nominal value of €0.0005 and a priceof £2.45 per share. The Company incurred approximately $33 million ofunderwriting and other associated costs. The ticker symbol for Inmarsat on theLondon Stock Exchange is ISAT (LSE:ISAT). Use of Proceeds and Debt Refinancing The net proceeds raised in the Initial Public Offering were used to repay infull €272.7 million Subordinated Preference Certificates in June 2005. Theremaining proceeds, in conjunction with surplus cash on the balance sheet at 22June 2005 and a $250 million term loan under the New Senior Credit Facility,were used to repay borrowings under the Previous Senior Credit Facility of$728.0 million. Associated with the repayment we wrote off $19.9 million ofdeferred financing costs. On 22 July 2005 the Group redeemed 35% of its 7 5/8% Senior Notes due 2012reducing the principal amount outstanding from $477.5 million to $310.4 million.Associated with the redemption we wrote off $6.1 million of deferred financingcosts and paid a cash redemption premium of $12.7 million. These amounts havebeen reflected in interest costs in the income statement for the 2005 FinancialYear. Relief efforts Following Hurricanes Katrina and Rita, Inmarsat made available additionalsatellite capacity and free call credits to agencies supporting the reliefeffort in the southern states of the USA. This created a surge in the use of theInmarsat mini-M and Global Area Network (GAN) services. Inmarsat has alsoprovided our Regional Broadband Global Area Network (R-BGAN) mobile satelliteterminals free of charge to assist with the Asian earthquake. Inmarsat providedTelecom Sans Frontieres with mini-M and GAN terminals with voice and datacapabilities during the Asian tsunami relief effort at the beginning of theyear. Sale of subsidiaries In early 2005, we undertook a strategic review and concluded that the activitiesof two of our subsidiaries were not core to our mobile satellite servicesstrategy and therefore we decided to dispose of our interest in both of theseoperations. On 2 September 2005 the Group sold Invsat Limited, a 100% ownedsubsidiary, to Nessco Limited. The Group received US$7.8 million in gross cashproceeds and reported a loss on disposal of US$3.0 million. On 17 October 2005the Group disposed of the assets and business of Rydex Corporation Limited, a100% owned subsidiary, to Seawave LLC. The Group received US$2.6 million ingross cash proceeds and reported a gain on sale of US$1.9 million. Interim dividends paid On 28 October 2005 the Board paid an interim dividend of 5.47 cents (US dollars)per ordinary share (total dividend $24.7 million). Agreement reached on Galileo systems operations Galileo is the European Union project to develop a new, advanced satellitenavigation system. It is intended that Galileo will be implemented through aPublic Private Partnership by a consortium involving many of Europe's leadingsatellite operators and aerospace companies. This consortium has yet to finaliseagreements for the formation of the various companies and negotiate and concludea Concession Contract. In an agreement signed on 5 December 2005 by the eight European companies thatform this consortium, and intend to form the Galileo concessionaire via theproposed Galileo Operating Company, it was agreed that Inmarsat will haveoverall management leadership in the Galileo Operations Company which would beformed to operate and maintain the Galileo system. Revenues Revenues for the 2005 Financial Year were $491.1 million, an increase of $10.4million, or 2%, compared with the 2004 Financial Year. Revenues, excludingsubsidiaries disposed of increased by 3%, from $465.8 million to $479.2 million. The table below sets out the components of our total revenue for each of theperiods under review. Financial Year --------------------- 2005 2004 ---------------------Revenues (US$ in millions)Maritime sector:voice services 102.0 105.0data services 165.1 146.4 ---------------------Total maritime sector 267.1 251.4Land sector:voice services 23.6 27.9data services 98.2 105.8 ---------------------Total land sector 121.8 133.7Aeronautical sector 22.7 16.9Leasing (incl. navigation) 60.9 56.9 ---------------------Total mobile satellite communications services 472.5 458.9Subsidiary revenues 11.9 14.9Other income 6.7 6.9 ---------------------Total revenue 491.1 480.7 ===================== Financial Year --------------------- 2005 2004 ---------------------Active terminals (1) (000's)Maritime 122.6 112.1Land 73.9 72.6Aeronautical 6.8 6.1 ---------------------Total active terminals 203.3 190.8 =====================____________________ (1) Active terminals are terminals registered with us as at 31 December thathave been used to access our services at any time during the precedingtwelve-month period. During the 2005 Financial Year, revenues from mobile satellite communicationservices were $472.5 million, an increase of $13.6 million, or 3%, compared withthe 2004 Financial Year. Growth has been strong in our maritime data andaeronautical sectors, as a result of continued success in our newer servicessuch as Fleet and Swift64; however this growth has been partly offset by thecontinued decline in our higher priced analogue service as customers migrate toour newer and lower priced digital services in line with expectations. The 2005Financial Year has also been a year of growth for our leasing business withadditional contracts including a new 5-year interoperability contract with theJapanese Civil Aviation Authority. The maritime, land, aeronautical and leasingsectors accounted for 56%, 26%, 5% and 13% of total revenues from mobilesatellite communication services respectively during the 2005 Financial Year. Maritime Sector. During the 2005 Financial Year, revenues from the maritimesector were $267.1 million, an increase of $15.7 million, or 6%, compared withthe 2004 Financial Year. This principally reflects an increase in data revenuewith a decrease in voice. Revenues from data services in the maritime sectorduring the 2005 Financial Year were $165.1 million, an increase of$18.7 million, or 13%, compared with the 2004 Financial Year. The increase inrevenues from data services reflects greater demand, as a result of the take-upand utilisation of our Fleet services in the new-build market, and increasedinterest for our smaller terminals with lower-speed data capabilities such asInmarsat-B and mini-M. Revenues from voice services in the maritime sectorduring the 2005 Financial Year were $102.0 million, a decrease of $3.0 million,or 3%, compared with the 2004 Financial Year. Historically our voice revenuesfor Maritime have been affected by the migration of users from our higher-pricedanalogue service to our lower priced digital services and in some casescompetition. This has been offset by growth in both our newer Fleet service andvarious promotions for mini-M and Inmarsat-B, which we have initiated to respondto increased competition. Land Sector. In 2005, revenues from the land sector were $121.8 million, adecrease of $11.9 million, or 9%, compared with the 2004 Financial Year.Revenues from data services in the land sector during the 2005 Financial Yearwere $98.2 million, a decrease of $7.6 million, or 7%, compared with the 2004Financial Year. The decrease is a result of the introduction of pricing on aregional basis (which we refer to as zonal pricing) for our R-BGAN service inaddition to a decline in high-speed data traffic following a reduction intraffic in the Middle East and competition from VSAT. Revenues from voiceservices in the land sector during the 2005 Financial Year were $23.6 million, adecrease of $4.3 million, or 15%, compared with the 2004 Financial Year. Thiscontinues the trend seen over the last few years of declining traffic volumesresulting from competition, principally for our mini-M and Large Antennae mini-Mservices, from operators of hand-held satellite telephones who offerlower-priced voice services. Aeronautical Sector. During the 2005 Financial Year, revenues from theaeronautical sector were $22.7 million, an increase of $5.8 million, or 34%,compared with the 2004 Financial Year. The increase continues to be attributedprimarily to our Swift64 high-speed data service, which targets the governmentaircraft and business jet markets as well as being used by commercial airlines.In addition low-speed data in the classic Aeronautical service benefited fromindustry growth. Leasing. During the 2005 Financial Year, revenues from leasing were $60.9million, an increase of $4.0 million, or 7%, compared with the 2004 FinancialYear. The increase principally resulted from a new 5-year interoperabilityagreement with the Japanese Civil Aviation Authority in May 2005 and primarilyrepresents a license fee. There was also a short-term positive impact on leasingas a result of Hurricane Katrina and the Pakistan earthquake relief efforts. Subsidiary revenues. Subsidiary revenues represent revenues from Invsat Limitedand Rydex Corporation Limited. During the 2005 Financial Year, subsidiaryrevenues were $11.9 million, a decrease of $3.0 million, or 20%, compared withthe 2004 Financial Year. This is due to the disposal of the subsidiaries duringthe year as discussed above. Other income. Other income of $6.7 million for the 2005 Financial Year consistsprimarily of income from the provision of conference facilities and leasingcertain floors at our head office to external organisations, fees for satellitetracking services and in-orbit support services supplied to third parties andrevenue from sales of R-BGAN end user terminals and is largely in line with theprevious year. Employee benefits costs Employee benefits costs during the 2005 Financial Year were $97.0 million, anincrease of $9.8 million, or 11% compared with the 2004 Financial Year. Includedin staff costs for the 2004 Financial Year were severance costs of $9.3 million.The more significant underlying increase in staff costs in the 2005 FinancialYear relates to an adverse movement in our hedged rate of exchange which hasincreased from $1.49/£1.00 in the 2004 Financial Year to $1.77/£1.00 in the 2005Financial Year (staff costs are in sterling and we report our results in USdollars). In addition in the 2005 Financial Year the Group has recognized $6.5million of stock option costs (2004: $0.1 million) relating principally to theall staff option scheme implemented in November 2004. The options primarily vestover a period of approximately 18 months from July 2005 to December 2006. Theremainder of the increase relates to a new share scheme for employees announcedin December 2005, which resulted in an additional $4.0 million of costs. Network and satellite operations costs Network and satellite operations costs during the 2005 Financial Year were $38.8million compared to $50.0 million during the 2004 Financial Year. Included inthis category are costs for leasing satellite capacity from Thuraya for theR-BGAN service. In the 2005 Financial Year we incurred only four months of costswith this service contract being cancelled with effect from the end of July2005, with costs for the months of May, June and July offset against amountsreceived from third parties in recognition of the delay in delivery of the firstof our Inmarsat-4 satellites. The decrease in Thuraya lease costs of $17.3million was offset in part by the commencement of warranties and additionalcosts for site service contracts on our Inmarsat-4 ground infrastructure thatwere not incurred in the 2004 Financial Year. Other operating costs During the 2005 Financial Year, other operating costs were $63.4 million, adecrease of $4.2 million, or 6%, compared with the 2004 Financial Year. In the2005 Financial Year we incurred office rental costs of $8.0 million (2004: $0.8million) following the sale and leaseback of our 99 City Road, London headoffice in November 2004. In addition we incurred $3.0 million of costs workingon a venture in Korea with a potential new distribution partner and $1.0 millionof legal fees in the pursuit of various investment opportunities to grow thebusiness. Offsetting these increases was a reduction in sponsorship costsassociated with the FIA World Rally Championship ($3.8 million). In addition theGroup recognised a foreign exchange gain in 2005 of $3.6 million compared with aloss of $8.1 million in 2004. Work performed by the Group and capitalised Own work capitalised of $25.2 million during the 2005 Financial Year is largelyin line with the 2004 Financial Year and relates principally to the continuedactivity surrounding our Inmarsat-4 satellites and the BGAN service. EBITDA As a result of the factors discussed above, EBITDA for the 2005 Financial Yearwas $317.1 million, an increase of $15.4 million, or 5%, compared with the 2004Financial Year. EBITDA margin has increased to 65% for the 2005 Financial Yearcompared to 63% for the 2004 Financial Year. Gain on disposal of tangible assets On 30 November 2004, we entered into a sale and 25-year leaseback for our headoffice building at 99 City Road, London. The gross proceeds from the sale of thebuilding were $125.1 million, which resulted in a gain on disposal of $42.6million in the 2004 Financial Year. Loss on termination of subsidiary undertakings On 2 September 2005 the Group sold Invsat Limited, a 100% owned subsidiary, toNessco Limited. The Group received $7.8 million in gross cash proceeds andreported a loss on disposal of $3.0 million. On 17 October 2005 the Group disposed of the assets and business of RydexCorporation Limited, a 100% owned subsidiary, to Seawave LLC. The Group received$2.6 million in gross cash proceeds and reported a gain on sale of $1.9 million. Depreciation and amortisation During the 2005 Financial Year, depreciation and amortisation was$106.5 million, a decrease of $17.6 million, or 14%, compared with the 2004Financial Year. This decrease is a result of the change in useful economic livesof our Inmarsat-3 satellites from 10 years to 13 years, which came into effectfrom 1 October 2004, offset in part by the commencement of depreciation ofcertain of our Inmarsat-4 satellites and ground infrastructure. We commenced depreciation on the first Inmarsat-4 satellite when it commencedcommercial service in June 2005. From January 2006 we will start depreciatingthe second Inmarsat-4 satellite. The depreciation charge for the 2005 FinancialYear for the first Inmarsat-4 satellite and other associated assets wasapproximately $19.9 million. Effective 1 October 2005, we prospectively changedthe useful economic lives of our Inmarsat-4 satellites from 13 years to 15 yearsto better reflect the design life of the spacecraft, the better-than-expectedperformance of the launch vehicles and the adoption of an optimal missionstrategy which are expected to extend the orbital lives of these satellites. Operating profit As a result of the factors discussed above, operating profit during the 2005Financial Year was $209.5 million, a decrease of $10.7 million, or 5%, comparedwith the 2004 Financial Year. The increase in EBITDA and reduction indepreciation and amortization, were not sufficient to offset the gain ondisposal of property of $42.6 million recognized in the 2004 Financial Year. Net interest payable Interest payable for the 2005 Financial Year was $163.8 million, a decrease of$35.5 million compared with the 2004 Financial Year. Following the listing ofInmarsat plc's shares on the London Stock Exchange in June 2005, the Grouprestructured its debt facilities and as such interest costs have been reducedsubstantially compared to the costs incurred in the 2004 Financial Year. See'Liquidity and capital resources'. Out of IPO proceeds the Group repaid theSubordinated Preference Certificates, which decreased interest costs by $58.2million, reduced the amount of its Senior Credit Facilities and repaid 35% ofits Senior Notes due 2012, which resulted in an additional decrease in interestcosts of $21.1 million. These decreases were offset by additional interest costsin the 2005 Financial Year including the write-off of $19.9 million of deferredfinancing costs following the refinancing of the Previous Senior CreditFacility, the expensing of facility fees on the New Senior Credit Facility of$2.9 million, the write off of deferred financing costs of $6.1 million andpayment of a redemption premium of $12.7 million on the repayment of 35% of theSenior Notes due 2012 and accreted interest on the November 2004 issued SeniorDiscount Notes of $32.4 million. In the 2004 Financial Year we incurred aforeign exchange loss of $28.0 million on the revaluation of the eurodenominated Subordinated Preference Certificates. Interest receivable for the 2005 Financial Year was $49.8 million, an increaseof $45.8 million compared with the 2004 Financial Year. The increase principallyrelates to a $3.4 million realised gain on an interest rate swap contract on thePrevious Senior Credit Facility and a realised foreign exchange gain on therepayment of the euro denominated Subordinated Preference Certificates of $39.3million. See "Use of proceeds" and "Liquidity and capital resources". Profit before tax For the 2005 Financial Year, profit before tax was $95.5 million, an increase of$70.6 million compared with the 2004 Financial Year with lower operating profitsoffset by lower net interest costs following the favourable restructuring of ourdebt portfolio. Income tax expense The tax charge for the 2005 Financial Year was $31.8 million, compared to $5.8million for the 2004 Financial Year. The increase in the tax charge is largelydriven by an increase in profit. The increase in the effective tax rate betweenthe 2004 Financial Year (23%) and the 2005 Financial Year (33%) is primarily dueto the fact that in 2004 Financial Year no tax liability arose upon the sale ofour head office building due to the availability of capital losses. Liquidity and capital resources Historically, the Group's principal uses of cash have been for capitalexpenditure, to fund the development, marketing and distribution of new servicesand to fund our working capital requirements. Those requirements were met bycash flows from our operating activities as well as from borrowings under bankfacilities and issuance of debt. Following the London Stock Exchange listing on22 June 2005 and the related transactions, the Group's indebtedness and debtservice obligations have decreased significantly. The Group had net borrowings at 31 December 2005 of $884.2 million primarilycomprising drawings on the New Senior Credit Facility of $250.0 million, SeniorNotes of $300.4 million (net of $10.0 million bond buy-back in December 2005),Senior Discount Notes of $332.2 million, net of cash and cash equivalents andshort-term deposits of $35.3 million. See Note 6 to the Consolidated FinancialResults. On 24 May 2005 the Group's subsidiary Inmarsat Investments Limited signed a new$550 million Senior Credit Facility led by Barclays Capital, ING Bank N.V. andThe Royal Bank of Scotland plc. The facility is for general corporate purposesincluding refinancing existing debt and was arranged in connection with the IPO. The $550 million five-year Senior Credit Facility consists of a $250 millionamortising term loan and a $300 million revolving credit facility. The term loanand drawings under the revolving credit facility were initially priced at 120bpabove LIBOR and thereafter tied to a leverage grid. The $300 million revolvingcredit facility is undrawn at 31 December 2005. The New Senior Credit Facility, in combination with existing surplus cash andthe proceeds of the IPO, was used to repay the Previous Senior Credit Facilityof $728.0 million and the outstanding balance of the euro-denominatedSubordinated Preference Certificates (€272.7 million). In addition on 22 July 2005 we redeemed $167.1 million, 35%, of the 7 5/8%Senior Notes 2012 issued by the Group's subsidiary Inmarsat Finance plc which,including interest and redemption premium totalled $185.9 million. In December2005 the Group's subsidiary Inmarsat Investments Limited purchased $10.0 millionof the 7 5/8% Senior Notes 2012 including a premium on purchase of $0.3 million. Net cash from operating activities during the 2005 Financial Year was $317.3million compared to $279.6 million during the 2004 Financial Year. The increaserelates to an increase of $7.8 million in interest income and movements inworking capital. The Group held approximately $380.0 million on deposit duringthe period prior to the IPO resulting in cash income of $4.0 million. Inaddition we realised a cash gain of $3.4 million on an amendment to an interestrate swap contract which fixed interest on a portion of the drawn PreviousSenior Credit Facility. Net cash used in investing activities during the 2005 Financial Year was $43.2million compared with $150.5 million for the 2004 Financial Year. During the2005 Financial Year the Group had an inflow from maturing short-term deposits of$151.7 million compared to an outflow of $100.6 million for the 2004 FinancialYear. In addition the Group received net proceeds of $9.4 million for the saleof Invsat Limited and Rydex Corporation Limited. Offsetting the inflow in the2005 Financial Year was continued capital expenditure for the construction ofour Inmarsat-4 satellites and associated ground infrastructure of $204.3million. In the 2004 Financial Year the Group incurred $34.9 million of costsrelating to the private equity transaction in 2003 in addition to $140.1 millionin capital expenditure primarily for the Inmarsat-4 satellites and associatedground infrastructure, offset in part by $125.1 million of net proceeds from thesale of our head office building at 99 City Road, London. Net cash used in financing activities during the 2005 Financial Year was $470.0million compared to $129.7 million during the 2004 Financial Year. On 22 June2005 the Company raised $637.5 million in net proceeds on its IPO. A combinationof the IPO proceeds, surplus cash and the New Senior Credit Facility (asdescribed above) were utilised to repay borrowings. A principal repayment of thePrevious Senior Credit Facility was also made during the 2005 Financial Year inthe amount of $9.5 million. In July 2005 the Group redeemed 35% of the SeniorNotes 2012 in the amount of $167.1 million and in December 2005 entered into abond buy-back deal acquiring $10.0 million of our bonds. During the 2004Financial Year we issued $477.5 million of Senior Notes, $301.0 million ofSenior Discount Notes and we repaid our bridge borrowings of $365.0 million,repaid $52.5 million of our Previous Senior Credit Facility and repaid $385.8million of the Subordinated Preference Certificates. The Group continually evaluates sources of capital and may repurchase,refinance, exchange or retire current or future borrowings and/or debtsecurities from time to time in private or open-market transactions, or by anyother means permitted by the terms and conditions of borrowing facilities anddebt securities. Seasonality Our revenues for the first and last months of each year are impacted by changesin demand from end-users during the holiday season. In particular, revenues fromdata services tend to decline during the holiday season, reflecting reducedbusiness activity. Historically, the impact of this seasonal decline in dataservices on our results of operations has been limited, as the decline has beensubstantially offset by increased voice traffic. However, as data revenuesincrease as a percentage of our total revenues, we expect the seasonal declinein the volumes may have a more pronounced effect on our first and fourth quarterresults. The impact of volume discounts increases over the course of eachfinancial year with lower discount levels in early quarters and higher discountsin later quarters. The effect of these volume discounts will be most prominentin the fourth quarter. Recent Events Management announced its intention in January 2006 to restructure theorganisation to reflect the fact that the Inmarsat-4 programme was virtuallycomplete. The principal action in the restructuring plan will involve aredundancy programme. The redundancies primarily will relate to those employeeswho were involved in the Inmarsat-4 programme. The departure of staff will bephased across the year as work is completed and the corporate structure isrealigned. The redundancy costs have not been recognized as a liability for the2005 Financial Year. The Board intends to declare a final dividend of 10.95 cents (US dollars) perordinary share to be paid on 26 May 2006 to ordinary shareholders on theregister of members at the close of business on 5 May 2006. Shareholders will beasked to approve the final dividend payment at the Annual General Meeting to beheld on 26 April 2006. Dividend payments will be made in Pounds Sterling basedon the exchange rate prevailing in the London market four business days prior topayment. This dividend has not been recognised as a liability for the 2005Financial Year. Subsequent to 31 December 2005 other than the events discussed above there havebeen no other material events, which would affect the information reflected inthe consolidated financial results of the Group. INMARSAT PLC CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2005 (unaudited) 2005 2004 Financial Financial Year Year (unaudited) (restated) --------------------------- (US$ in millions) Revenue 491.1 480.7Employee benefits costs (97.0) (87.2)Network and satellite operations costs (38.8) (50.0)Other operating costs (63.4) (67.6)Work performed by the Group and capitalised 25.2 25.8 ---------------------------EBITDA 317.1 301.7Gain on disposal of property - 42.6Loss on termination of subsidiary undertakings (1.1) -Depreciation and amortisation (106.5) (124.1) ---------------------------Operating profit 209.5 220.2Interest receivable 49.8 4.0Interest payable and similar charges (163.8) (199.3) ---------------------------Net interest payable (114.0) (195.3) ---------------------------Profit before income tax 95.5 24.9Income tax expense (31.1) (5.8) ---------------------------Profit for the year 64.4 19.1 ---------------------------Dividends (24.7) - ---------------------------Retained profit for the year 39.7 19.1 --------------------------- Earnings per share for profit attributable to theequity holders of the Company during the year(expressed in US$ per share) -Basic 0.17 0.06 ----------------------------Diluted 0.17 0.06 =========================== INMARSAT PLC CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 31 December 2005 (unaudited) 2005 2004 Financial Year Financial Year (unaudited) (restated) --------------------------------- (US$ in millions)Profit for the year 64.4 19.1Movement in cumulative translation reserve (0.8) 8.0Movement in cash flow hedge reserve (15.6) -Actuarial losses from pensionand post retirement healthcare benefits (8.7) (5.7)Deferred tax credit on actuarial losses 2.6 1.7 ---------------------------------Total recognised income for the year 41.9 23.1 ================================= INMARSAT PLC CONSOLIDATED BALANCE SHEET At 31 December 2005 (unaudited) 2005 2004 Financial Year Financial Year (unaudited) (restated) --------------------------------- (US$ in millions)ASSETSNon-current assetsProperty, plant and equipment 1,319.1 1,147.9Intangible assets 524.5 508.1 --------------------------------- 1,843.6 1,656.0 ---------------------------------Current assetsCash and cash equivalents 35.3 233.0Short-term deposits - 151.7Trade and other receivables 143.3 156.7Inventories 0.3 1.2Derivative financial instruments 2.3 - --------------------------------- 181.2 542.6 ---------------------------------Total assets 2,024.8 2,198.6 =================================LIABILITIESCurrent liabilitiesTrade and other payables 172.4 113.2Borrowings 10.6 37.2Provisions 0.4 1.1Current income tax liabilities 23.1 19.3Derivative financial instruments 3.6 - --------------------------------- 210.1 170.8 ---------------------------------Non-current liabilitiesOther payables 33.8 35.2Borrowings 908.9 1,824.5Provisions 37.6 29.5Deferred income tax liabilities 157.6 140.1Derivative financial instruments 0.3 - --------------------------------- 1,138.2 2,029.3 ---------------------------------Total liabilities 1,348.3 2,200.1 =================================Net assets 676.5 (1.5) =================================SHAREHOLDERS' EQUITYOrdinary shares 0.4 0.3Share premium 672.3 34.8Other reserves 8.7 7.4Accumulated losses (4.9) (44.0) ---------------------------------Total shareholders' equity 676.5 (1.5) ================================= INMARSAT PLC CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2005 (unaudited) 2005 2004 Financial Year Financial Year (unaudited) --------------------------------- (US$ in millions)Cash flow from operating activities:Cash generated from operations 307.7 275.9Interest received 10.4 2.6Income taxes (paid)/received (0.8) 1.1 ---------------------------------Net cash inflow from operating activities 317.3 279.6 ---------------------------------Cash flow from investing activities:Origination of short-term deposits 151.7 (100.6)Purchase of property, plant and equipment (201.9) (136.8)Additions to capitalised development costs (2.4) (3.3)Proceeds from sale of property - 125.1Proceeds on disposal of subsidiary undertakings 9.4 -Transaction costs on acquisitions made in 2003 - (34.9) ---------------------------------Net cash used in investing activities (43.2) (150.5) ---------------------------------Cash flow from financing activities:Net proceeds from issue of ordinary shares 637.5 0.9Net proceeds of New Senior Credit Facility 244.4 -Repayments of Previous Senior Credit Facilities (737.5) (427.5)Arrangement costs of Senior Notes and Senior Discount Notes (0.8) (30.2)Net proceeds from (repayment)/issuance of SeniorNotes and Senior Discount Notes (177.1) 781.1Repayment of Subordinated Preference Certificates (334.8) (385.8)Finance lease interest paid (0.1) (0.2)Interest paid on Senior Notes and Senior Credit Facilities (76.9) (67.9)Principal payments under finance leases - (0.1)Dividends paid to shareholders (24.7) - ---------------------------------Net cash used in financing activities (470.0) (129.7) ---------------------------------Foreign exchange adjustment (0.6) 0.3 ---------------------------------Net decrease in cash and cash equivalents (196.5) (0.3) =================================Movement in cash and cash equivalents:At beginning of year 231.6 231.9Net (decrease)/increase in cash and cash equivalents (196.5) (0.3) ---------------------------------As reported on balance sheet(net of bank overdrafts) 35.1 231.6 =================================At end of period, comprising:Bank and cash in hand 35.3 13.7Short-term deposits - 107.0Restricted cash - 112.3Bank overdrafts (0.2) (1.4) --------------------------------- 35.1 231.6 ================================= NOTES TO THE CONSOLIDATED FINANCIAL RESULTS 1. General Information The Company was reregistered as a public limited company and changed its name toInmarsat plc on 27 May 2005. The Company is incorporated and domiciled inEngland and Wales. The address of its registered office is 99 City Road, London, EC1Y 1AX UnitedKingdom. The Company listed on the London Stock Exchange on 22 June 2005. These unaudited consolidated financial results were approved for issue by theBoard of Directors on 8 March 2005. 2. Principal accounting policies Basis of preparation Prior to 2005, the Group prepared its audited annual financial statements underUK Generally Accepted Accounting Principles (UK GAAP). From 1 January 2005, theGroup is required to prepare its annual consolidated financial statements inaccordance with International Financial Reporting Standards (IFRS). These preliminary financial results have been prepared under the historical costconvention as modified by the revaluation of financial assets and financialliabilities (including derivative financial instruments) at fair value throughthe income statement. The unaudited Group results for the 2005 Financial Year have been prepared on abasis consistent with the IFRS accounting policies as set out on pages 6 to 13of the audited Consolidated Financial Statements for the year to 31 December2004 as available on our website www.inmarsat.com/about us/investor relations/financial reports/2004 Inmarsat plc (IFRS). The applied IFRS accounting policieswere selected by management considering all applicable IFRS's issued by theInternational Accounting Standards Board (IASB). IAS 39 'Financial Instruments:Recognition and Measurement' and IAS 32 'Financial Instruments: Disclosure andPresentation' have not been applied to the 2004 Financial Year because the Grouphas taken a transitional exemption and adopted those standards prospectivelyfrom 1 January 2005. See Note 7 for the impact of IAS 39 on the transitionalbalance sheet for 1 January 2005. The preparation of the consolidated financial statements in conformity with IFRSrequires management to make certain estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the balance sheet dates and the reported amounts of revenueand expenses during the reported period. Although these estimates are based onmanagement's best knowledge of the amount, events or actions, the actual resultsultimately may differ from those estimates. The functional currency of the Company and most of the Group's subsidiaries andthe presentation currency is the US dollar, as the majority of operationaltransactions and borrowings are denominated in US dollars. Comparatives The Group previously disclosed foreign exchange gains and losses within'employee benefit costs', 'network and satellite operations costs' and 'otheroperating costs'. Management believes that their inclusion only in 'otheroperating costs' is a fairer representation of the Group's activities. The Group has reclassified the 2004 current and deferred tax balances to reflectthe treatment of pension and post retirement benefits under IAS 19 "EmployeeBenefits". The effect of this reclassification is to increase the corporationtax liability as at 31 December 2004 by $3.3 million, with a correspondingdecrease in the deferred tax liability (consisting of a $2.2 million adjustmentto opening balances and $1.1 million adjustment to the 2004 financial year taxcharge). The impact on net assets is nil. Restatements The Group has restated the 2004 deferred tax balance to account for a $4.2million asset recorded incorrectly on interest deductions in the prior year. Theeffect of this restatement is to increase the income tax expense by $4.2million, with a corresponding increase to the deferred tax liability of $4.2million for the 2004 Financial Year. The impact reduces net assets in the 2004Financial Year from $2.7 million to a net liability balance of $1.5 million. 3. Segment information The Group operates in one business segment being the supply of mobile satellitecommunications services (MSS). "Other" mainly comprises the results ofsubsidiaries, Invsat and Rydex, prior to their respective disposals. Primary reporting format-Business segments 2005 2004 Financial Year Financial Year (unaudited) (restated) MSS Other Unallocated Total MSS Other Unallocated Elimination Total ----- ------ ----------- ------ ----- ----- ----------- ----------- ------ ((US$ in millions)Revenue 474.2 16.9 - 491.1 461.0 19.7 - - 480.7 ----- ------ ----------- ------ ----- ----- ----------- ----------- ------Segment 209.7 (0.2) - 209.5 219.3 0.9 - - 220.2result(operatingprofit) Net interestcharged tothe income - - (114.0) (114.0) - - (195.3) - (195.3)statement ------- ------- Profit before 95.5 24.9income tax Income taxexpense (31.1) (5.8) ------- -------Profit forthe year 64.4 19.1 ------- ------- Segment 1989.0 - 35.8 2,024.8 2,120.0 17.4 69.7 (8.5) 2,198.6assets Segmentliabilities (247.8) (0.3) (1,100.2) (1,348.3) (238.5) (8.4) (1,953.7) 0.5 (2,200.1) Capitalexpenditure (305.0) - - (305.0) (139.6) (0.7) - - (140.3) Depreciation (94.6) (0.7) - (95.3) (114.1) (1.0) - - (115.1) Amortisationofintangible (11.2) - - (11.2) (9.0) - - - (9.0)assets 4. Net interest payable 2005 2004 Financial Financial Year Year (unaudited) ------------------------- (US$ in millions)Interest and facility feespayable on bank loans and overdrafts (1.1) (0.2)Interest on Senior Notes and Senior Credit Facilities (58.9) (80.0)Accretion of discount on the Senior Discount Notes (32.4) (3.2)Interest rate swap (1.4) -Interest payable under finance lease contracts (0.1) (0.2)Premium on investment in Senior Notes (0.3) -Accretion of discount on the principal of SubordinatedPreference Certificates (19.6) (77.8)Amortisation of debt issue costs (8.2) (7.3)Unwinding of discount on deferred satellite liabilities (3.1) (2.6)Unrealised currency revaluation loss on Subordinated PreferenceCertificates (net of $15.3 million realised gain on redemption) - (28.0)Previous Senior Credit Facility deferred debt issue costswritten off (19.9) -Deferred debt issue costs written off and redemptionpremium paid on repayment of 35% Senior Notes due 2012 (18.8) - -------------------------Total interest payable and similar charges (163.8) (199.3) -------------------------Bank interest receivable and other interest 6.1 4.0Realised gain on repayment of Subordinated PreferenceCertificates 39.3 -Realised gain on amendment to interest rate swap 3.4 -Senior Notes premium write off 1.0 - -------------------------Total interest receivable and similar income 49.8 4.0 ------------------------- Net interest payable (114.0) (195.3) ========================= 5. Reconciliation of movements in shareholders' equity Ordinary Share Accumulated Total share premium Other losses capital account Reserves (restated) ----------------------------------------------------- (US$ in millions)Balance at 1 January 2004 0.3 34.2 - (59.1) (24.6) =====================================================Issue of share capital - 0.6 - - 0.6Profit for the year asreported - - - 23.3 23.3Prior year adjustment (4.2) (4.2)Shares issued to theemployee benefit trust - - (0.7) - (0.7)Issue of share options - - 0.1 - 0.1Movement in cumulativetranslation reserve - - 8.0 - 8.0Actuarial losses frompension and post- - - - (4.0) (4.0)retirement healthcare benefit (net of tax) -----------------------------------------------------Balance at 31 December2004 (as restated) 0.3 34.8 7.4 (44.0) (1.5)Adoption of IAS 39(note 7) - - 14.0 - 14.0 -----------------------------------------------------Balance at 1 January2005 (as restated) 0.3 34.8 21.4 (44.0) 12.5 =====================================================Fair valuegains/(losses): - - (15.6) - (15.6) - cash flow hedgesIssue of ordinaryshare capital 0.1 - - - 0.1Share optionsexercised 0.2 0.2Issue of share premium - 637.5 - - 637.5Issue of share options - - 3.5 - 3.5Deferred tax on shareoptions - - - 5.5 5.5Profit for the year - - - 39.7 39.7Actuarial losses frompension and post- - - - (6.1) (6.1)retirement healthcare benefit (netof tax)Movement in cumulativetranslation reserve - - (0.8) - (0.8) -----------------------------------------------------Balance at 31 December 2005 0.4 672.3 8.7 (4.9) 676.5 ===================================================== 6. Net borrowings These balances are shown net of unamortised deferred finance costs, which havebeen allocated as follows: As at 31 December 2005 As at 31 December 2004 (unaudited) ---------------------------------------------------------- Amount Deferred Net Amount Deferred Net finance balance finance balance cost cost ---------------------------------------------------------- (US$ in millions)Current:Bank overdraft 0.2 - 0.2 1.4 - 1.4Obligationsunder financeleases - - - 0.1 - 0.1Deferredsatellitepayments 10.4 - 10.4 8.0 - 8.0Current portion - Senior Notes - - - - - -Current portion- PreviousSenior CreditFacility - - - 27.7 - 27.7 ----------------------------------------------------------Total currentborrowings 10.6 - 10.6 37.2 - 37.2Non-current:Previous SeniorCredit Facility - - - 709.9 (21.7) 688.2New SeniorCredit Facility 250.0 (2.3) 247.7 - - -Senior DiscountNotes, 10.375% 332.2 (8.7) 323.5 301.0 (9.7) 291.3-Accretion ofdiscount on theprincipal 4.4 - 4.4 3.2 - 3.2Senior Notes 300.4 (10.6) 289.8 477.5 (18.9) 458.6Premium onSenior Notes 1.3 - 1.3 2.4 - 2.4SubordinatedPreferenceCertificates - - - 348.5 - 348.5Deferredsatellitepayments 42.2 - 42.2 32.3 - 32.3 ----------------------------------------------------------Totalnon-currentborrowings 930.5 (21.6) 908.9 1,874.8 (50.3) 1,824.5 ----------------------------------------------------------Total Borrowings 941.1 (21.6) 919.5 1,912.0 (50.3) 1,861.7 ==========================================================Cash and cashequivalents (35.3) - (35.3) (233.0) - (233.0)Short-termdeposits - - - (151.7) - (151.7) ----------------------------------------------------------Net Borrowings 905.8 (21.6) 884.2 1,527.3 (50.3) 1,477.0 ========================================================== 7. IAS 32 and IAS 39 transition balance sheet The Group adopted IAS 32 'Financial Instruments: presentation and disclosure'and IAS 39 'Financial Instruments: recognition and measurement' from 1 January2005. In the preparation of its financial statements in accordance with IFRS forthe 2004 Financial Year, the Group continued to apply the hedge accounting rulesof UK GAAP, taking advantage of the exemption available within IFRS 1 'Firsttime adoption of IFRS'. The Group is required to recognise transitional adjustments in accounting forits financial instruments in accordance with the measurement requirements of IAS39 at 1 January 2005. The Group qualifies to hedge account for a number of its hedging arrangements.IFRS 1 requires the Group to recognise various transitional adjustments toaccount for those hedging relationships at 1 January 2005. The accounting forthose hedging relationships at transition depends on the nature of the hedgeditem and the hedged risk. Detailed below is a reconciliation between the IFRSbalance sheet as at 31 December 2004 applying prior GAAP hedge accounting andthe balance sheet after the adoption of both IAS 32 and IAS 39. The Group's interest rate swap and forward exchange contracts were previouslynot accounted for as cash flow hedges of forecasted transactions under UK GAAPand as such were not previously measured at fair value. On transition, thederivatives' fair values have been recognised on the balance sheet and directlyin reserves. Any deferred gains or losses will be recognised in future earningsat the time at which the hedged forecasted transaction is recognised. All derivative instruments will continue to be recognised on balance sheet atfair value with future gains and losses being recognised immediately inearnings, except when the hedging requirements of IAS 39 are met. January 1, IAS 39 Transition January 1, 2005 Adjustments 2005 (as restated) ---------------------------------------------------------- (US$ in millions)ASSETSNon-current assetsProperty, plant andequipment 1,147.9 - 1,147.9Intangible assets 508.1 - 508.1Derivative financialinstruments - 6.4 6.4 ---------------------------------------------------------- 1,656.0 6.4 1,662.4 ----------------------------------------------------------Current assetsCash and cash equivalents 233.0 - 233.0Short-term deposits 151.7 - 151.7Trade and other receivables 156.7 - 156.7Inventories 1.2 - 1.2Derivative financialinstruments - 7.6 7.6 ---------------------------------------------------------- 542.6 7.6 550.2 ----------------------------------------------------------Total assets 2,198.6 14.0 2,212.6 ==========================================================LIABILITIESCurrent liabilitiesTrade and other payables 113.2 - 113.2Borrowings 37.2 - 37.2Provisions 1.1 - 1.1Current income tax liabilities 19.3 - 19.3 ---------------------------------------------------------- 170.8 - 170.8 ----------------------------------------------------------Non-current liabilitiesOther payables 35.2 - 35.2Borrowings 1,824.5 - 1,824.5Provisions 29.5 - 29.5Deferred income taxliabilities 140.1 - 140.1 ---------------------------------------------------------- 2,029.3 - 2,029.3 ----------------------------------------------------------Total liabilities 2,200.1 2,200.1 ==========================================================Net assets (1.5) 14.0 12.5 ==========================================================SHAREHOLDERS' EQUITYOrdinary shares 0.3 - 0.3Share premium 34.8 - 34.8Other reserves 7.4 14.0 21.4Retained earnings/(Accumulated losses) (44.0) - (44.0) ----------------------------------------------------------Total shareholders' equity (1.5) 14.0 12.5 ========================================================== This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Inmarsat