Inmarsat PLC reports Interim Results 2011

Inmarsat, the leading provider of global mobile satellite communications services, today reported consolidated financial results for the 6 months ended 30 June 2011.

Inmarsat plc Interim Results Highlights

Total revenue $682.9m up 20% (2010: $570.7m)

EBITDA $426.9m up 28% (2010: $334.4m)

Profit before tax $254.8m up 68% (2010: $151.8m)

Interim dividend of 15.4 cents (US$) up 10%

30,000 IsatPhone Pro handsets activated to date

Rupert Pearce appointed CEO effective January 2012

Acquisition of Ship Equip International completed

$1.45bn of new financing completed, Inmarsat-5 fully-funded

$250m share repurchase programme announced today

Inmarsat Group Limited Second Quarter Highlights

Total revenue $359.0m up 24% (2010: $289.2m)

Total Inmarsat Global MSS revenue $181.3m (2010: $181.7m)

EBITDA $222.7m up 32% (2010: $168.6m)

Andrew Sukawaty, Chairman and Chief Executive Officer, said, “Income from our Cooperation Agreement with LightSquared is driving record revenue and EBITDA growth and offsetting a slowdown in the growth of our Inmarsat Global MSS revenue. While we believe that a return to more normalised revenue growth in our MSS business is only a matter of time, we expect near-term factors will constrain growth for longer than previously anticipated. As a result, we are revising our outlook for MSS revenue growth for 2011. In the meantime, given the strong financial position of the company, we have increased our interim dividend and have launched a share repurchase programme.”

Growth in Other income, primarily resulting from our Cooperation Agreement with LightSquared, was responsible for our Inmarsat Global overall revenue growth during the first half.  During the first half we entered into a further amendment agreement with LightSquared and expect to begin recognising additional revenue from this amendment during the second half of 2011. 

In the maritime sector, our results continue to be adversely impacted by rapid customer migration to our FleetBroadband service where pricing is typically lower than the older services being replaced. In addition, voice to email substitution and, to a lesser extent, competition from alternative providers, have contributed to lower than expected revenue growth in 2011. However, activations of new FleetBroadband terminals have remained strong and we added 5,607 terminals during the first half, of which 2,727 were activated in the second quarter. Our analysis of customers who have migrated to FleetBroadband shows consistently that average data usage per ship is increasing in response to the capability of the faster service. Usage growth will gradually offset the revenue impact of service migration, while the number of ships yet to migrate is rapidly falling.

While we remain confident in the longer term prospects for our maritime business, we now expect the impact of migration to last longer than previously anticipated and this will have an effect on maritime results for the remainder of the year and possibly the early part of 2012.

To improve maritime revenue growth and visibility, we have recently introduced package-based pricing plans that are proving effective in retaining business previously at risk from alternative service providers. In the short period since we began offering such plans, we have won orders from ship operators for over 150 vessels to be upgraded to FleetBroadband combined with a pricing plan.  In almost all circumstances, these plans will result in significantly higher revenue per ship for Inmarsat, but much of the revenue benefit of these upgrades will only be realised in future periods.

In our MSS land sector, we are seeing continued take up of our BGAN and handheld IsatPhone Pro service from new users and high usage levels in North Africa. However, this growth is being largely offset by a decline in revenue from foreign government and military users in Afghanistan due to reductions in troop numbers and changes in their operational status. As a result, revenue growth from our land mobile sector is likely to continue to be impacted by declining revenue from Afghanistan for some time. 

We are pleased with the progress of our handheld IsatPhone Pro service. After a relatively short period since launch, we have now reached the milestone of 30,000 active units. Feedback from our distribution channel suggests that IsatPhone Pro is taking at least a third of all new satellite phone sales. This metric puts us ahead of our market share target by number of units and we expect a more material revenue contribution to follow in due course.

Changes in demand from aeronautical government customers, particularly for service over Afghanistan, continues to hold back our aeronautical and leasing revenue growth. While we continue to add new SwiftBroadband terminals at a very strong rate and have already replaced lost leasing business, we now expect revenue from our aeronautical and leasing sectors in the second half to be consistent with the first half. 

Revenue growth in our Inmarsat Solutions division has primarily been driven by recognition of new revenues following the acquisition of Ship Equip and by growth in our Segovia business.