Inmarsat Holdings Limited Reports Third Quarter 2005 Results

Published November 28th, 2005 - 07:19 GMT

Inmarsat Holdings Limited Reports Third Quarter 2005 Results

 

Inmarsat Holdings Limited, a wholly-owned subsidiary of Inmarsat plc (LSE: ISAT), the leading provider of global mobile satellite communications services, today reported consolidated financial results for the 3 months ended 30 September 2005.

 

·        Third quarter total revenue $120.0 million and EBITDA $77.6 million

·        Strong maritime and aeronautical sector performance

·        Disposal of subsidiary Invsat completed, net cash proceeds of $6.7 million

·        Senior Notes redemption completed, principal amount reduced by 35%

 

Andrew Sukawaty, Inmarsat’s Chairman and Chief Executive Officer said, “Inmarsat met its revenue and cashflow targets during the third quarter.  We successfully launched the second Inmarsat-4 satellite in November to serve the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Americas and we are now focused on the start of commercial Broadband Global Area Network (BGAN) services which we expect in early December.”

 

Mobile Satellite Services

 

The maritime sector performed strongly in the third quarter.  The increasing impact of volume discounts in our maritime data business in the third quarter was fully offset by underlying growth in traffic volumes and resulted in a sequentially flat revenue performance on the second quarter.  Continued take up of our Fleet maritime services was the main driver of this performance and traffic volumes for the service have been consistently growing at around 20% each quarter.  While traffic volumes for maritime voice services also increased on the prior year and sequentially on the second quarter, revenue performance was impacted by volume discounts and additionally by a greater proportion of lower priced off-peak traffic, by analogue to digital service migration and by the impact of competition.

 

Our land sector performance met our expectations and our data business showed underlying improvement as the quarter progressed.  In September the importance of mobile satellite services was underlined when Inmarsat services were used for vital communications in the aftermath of hurricanes Katrina and Rita in the United States.  Working with our distribution partners, Inmarsat contributed to the humanitarian emergency by donating some services free of charge to agencies responding to the situation.  After setting aside the impact of Katrina we were encouraged by improving volumes from our GAN and Regional BGAN services as the quarter progressed.  For the quarter as a whole, while land sector revenues were impacted by volume discounts, traffic was broadly flat on the second quarter.  The land sector remains subject to concentrated usage by government and military users, as a result we experience some volatility in revenue as activity around the world changes from time to time.  While land voice revenue continues to be impacted by competition from hand-held MSS operators, we believe the imminent introduction of BGAN voice services will help to address the competitive impact on this business.

 

Our aeronautical sector performed strongly in the quarter with increased revenue and traffic volumes both over same period last year and sequentially on the second quarter.    Our leasing business performed in line with management expectations.

 

The volume discounts we offer to our distributors have an increasing impact on our margins as the year progresses.  As our distributors reach certain volume targets we reduce our wholesale rates and this process reduces margins until the end of the calendar year when our rates are then reset to their pre-discount level.  During the third quarter volume discounts resulted in wholesale price reductions across our maritime, land, and aeronautical sectors.  We expect volume discounts to continue to impact our pricing and reported revenue performance in the fourth quarter.

 

Net operating costs for the third quarter were $42.4 million, an increase of $3.2 million or 8%.  Compared to the same period last year, net operating costs were adversely affected principally by foreign exchange movements impacting our sterling costs and by rental payments for our headquarters building in London.  This was offset in part by reduced costs for our capacity lease with Thuraya which we terminated during the third quarter.

 

Depreciation and amortisation costs for the third quarter 2005 were $33.9 million, a decrease of $5.6 million compared to $39.5 million recorded for the third quarter 2004.  This decrease primarily reflects the change in accounting policy regarding the useful estimated lives of our satellites.  However, during the third quarter we began to incur depreciation for our first Inmarsat-4 satellite and certain assets related to our BGAN service.  New depreciation charges in the third quarter were approximately $9.0 million.

 

Net interest payable for the third quarter 2005 was $37.6 million, which included $18.8 million of non-recurring expense related to the partial redemption of our Senior Notes.  Underlying interest was consistent with our debt structure and cash resources.

 

In connection with the sale of our subsidiary Invsat, we recognized a loss of $2.8 million and received net cash proceeds from the disposal of $6.7 million.  After tax we recorded a loss for the third quarter of $2.3 million compared to a loss of $10.4 million for the prior year.  Finally, we recognised the interim dividend of our parent company Inmarsat plc of $24.7 million.

 

Liquidity

 

In July we completed a partial redemption of 35% of the principal amount of our 7.625% Senior Notes due 2012.  This redemption reduced the principal amount outstanding from $477.5 million to $310.4 million at the end of the quarter.  Including a cash redemption penalty of $12.7 million we used approximately $180.0 million in cash to affect the redemption.

 

At the end of the third quarter we had total cash of $44.6 million and total external debt of $889.2 million.  In addition to our cash resources, we had a revolving credit facility with an amount available but undrawn at the end of the third quarter of $300 million.  Cash used to fund capital expenditure during the quarter was $57.3 million.  As the dividend of Inmarsat plc was not paid until the end of October, this did not impact our liquidity in the third quarter.

 

Inmarsat plc

 

Inmarsat Holdings Limited, through its subsidiary Inmarsat Finance II plc, is the issuer of $450 million of 10.375% Senior Discount Notes due 2012.  Inmarsat Group Limited, through its subsidiary Inmarsat Finance plc, is the issuer of $310.4 million of 7.625% Senior Notes due 2012.  Both Inmarsat Holdings Limited and Inmarsat Group Limited are required by the terms of the Notes outstanding to report quarterly financial results.  Currently the financial reports of both Inmarsat Holdings Limited and Inmarsat Group Limited are prepared in accordance with UK GAAP.  Inmarsat plc is the ultimate parent company of the Inmarsat group and its next results will be preliminary results for the year 2005 and are expected to be reported in March 2006.

 

Other Information

 

Inmarsat management will discuss the third quarter results and other financial and business information in a conference call on Wednesday, 23 November at 3:00 p.m. London time (GMT), (United States, 10:00 a.m. EST).  To access the call please dial +44 20 8609 0238.  The access code for the call is 916160#.  The call will also be recorded and available for one week after the event.  To access the recording please dial +44 20 8609 0289 and enter the conference code 133477.

 

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 factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those projected in the forward-looking statements.  These factors include: general economic and business conditions; changes in technology; timing or delay in signing, commencement, implementation and performance of programmes, or the delivery of products or services under them; structural change in the satellite industry; relationships with customers; competition; and ability to attract personnel.  You are cautioned not to rely on these forward-looking statements, which speak only as of the date of this announcement.  We undertake no obligation to update or revise any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances.

 

 

 

 

Inmarsat Holdings Limited

Revenue Breakdown

Third quarter ended September 30,

 

2005

2004

(as restated)

Revenues

(US$ in millions)

Maritime sector:

 

 

voice services

24.6

25.9

data services

42.5

37.7

Total maritime sector

67.1

63.6

Land sector:

 

 

voice services

5.6

7.0

data services

23.3

25.3

Total land sector

28.9

32.3

Aeronautical sector

5.7

4.3

Leasing (incl. navigation)

14.1

14.7

Total mobile satellite communications services

115.8

114.9

Subsidiary revenues

3.0

4.3

Other income

1.2

1.3

Total Revenues

120.0

120.5

 

Active Terminal Data

As at September 30,

 

2005

2004

Active terminals (1)

(000’s)

Maritime

120.6

108.4

Land

73.6

72.9

Aeronautical

6.6

6.0

Total active terminals

200.8

187.3

 

(1)       Active terminals means terminals registered with us as at the end of the relevant financial period that have been used to access our services at any time during the preceding twelve-month period.

 

Inmarsat Holdings Limited

Consolidated Profit and Loss Account

Third quarter ended

September 30,

Third quarter ended

September 30,

 

2005

2004

(as restated)

 

(US$ in millions)

 

 

 

Revenue

120.0

120.5

 

 

 

Depreciation and amortization

(33.9)

(39.5)

Other net operating costs

(42.4)

(39.2)

Total operating costs

(76.3)

(78.7)

Group operating profit

43.7

41.8

 

 

 

Interest receivable and similar income

1.8

(11.8)

Interest payable and similar charges

(39.4)

(40.7)

Losses on termination of subsidiary undertakings

(2.8)

-

Profit/(loss) before taxation

3.3

(10.7)

Taxation

(5.6)

0.3

Profit/(loss) after taxation

(2.3)

(10.4)

Dividend paid

(24.7)

-


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