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Inmarsat plc Interim
Management Statement
2 May 2013
Inmarsat plc provided
the following
information for the
three months ended 31
March 2013.
Inmarsat plc –
Highlights Total revenue
(excluding LightSquared)
$310.8m up 2.4% (2012:
$303.5m) Wholesale
maritime MSS revenues up
8.7% Strong subscriber
growth: FleetBroadband,
XpressLink, IsatPhone
Pro Total active
terminals up 16% Global
Xpress programme on
track and budget
Inmarsat Group Limited -
First Quarter Highlights
Inmarsat Global MSS
revenues $184.6m up 3.7%
(2012: $178.0m) Inmarsat
Solutions revenues
$189.5m (2012: $190.8m)
Total EBITDA (excluding
LightSquared) $154.2m
(2012: $157.7m)
Rupert Pearce,
Inmarsat’s Chief
Executive Officer, said,
“The improved results
from our wholesale MSS
business have continued
in the first quarter,
with positive
performances across our
business sectors. We
have also maintained
momentum in subscriber
additions for new
services. These results
provide for continued
confidence in our
outlook for full year
revenues at the
wholesale level. Within
our Inmarsat Solutions
retail segment we have
seen results in line
with our expectations
from three of our four
business units. However,
in our US Government
business unit, we have
seen a sudden and
pronounced deterioration
in both demand and
profitability, in each
case principally related
to US budget cuts. This
has led to further
margin compression in
the Solutions business
in the first quarter and
we expect the current
adverse market
conditions for our US
Government retail
activities to continue
for the time being. We
aim to substantially
mitigate the impact of
this changed environment
by addressing the cost
base for our US
Government business unit
and by implementing
other cost controls
across the group.
Looking ahead, we are
making rapid progress
with Alphasat and our
Global Xpress programme
and our deployment plans
remain firmly on track.”
Maritime
Growth in our maritime
data revenues was driven
by increased take-up and
usage of our
FleetBroadband service
and by pricing and
service package changes
primarily implemented in
May 2012. During the
first quarter we added
1,924 FleetBroadband
subscribers. With
FleetBroadband we are
extending our market
leadership in the
maritime MSS market
while we are also making
steady progress in the
maritime VSAT market
with our XpressLink
service. Despite the
overall maritime revenue
growth reported,
customer migration to
FleetBroadband from
certain older services
continues to be a
constraint on our rate
of revenue growth as the
price of FleetBroadband
services is typically
substantially lower than
the price of equivalent
services on the
terminals being
replaced. As the number
of customers still using
our older services
declines through the
migration process, so
the revenue impact of
migration reduces over
time.
With effect from 1
January 2013, we
adjusted the intra-group
pricing to Inmarsat
Solutions for L-band
services used for
XpressLink. As
XpressLink combines
L-band and VSAT services
in a single service
package, Inmarsat Global
applies a charge to
Inmarsat Solutions for
the L-band element of
service. During 2012,
the first full year of
XpressLink service, we
were able to compare
actual customer usage
trends to our previous
assumptions and have
updated our pricing
accordingly. Had we not
adjusted the pricing, we
estimate that maritime
revenues for the first
quarter 2013 would have
been $1.7m higher than
the figure reported. The
pricing adjustment has
no impact on the total
revenue or margin at a
group level.
Land mobile
In the land mobile
sector, the decline in
data revenues is due to
on-going troop
withdrawals from
Afghanistan and lower
usage by other BGAN
users. We estimate that
global events including
Afghanistan contributed
$1.5m more revenue in
the first quarter 2012
when compared to the
first quarter 2013.
Although we continue to
see growth in BGAN usage
from new subscribers,
this growth did not
fully offset the impact
of reduced revenues from
Afghanistan and other
customers.
Voice revenue in our
land mobile sector
increased due to growth
in revenues from our
IsatPhone Pro service.
We ended the first
quarter with
approximately 90,000
active subscribers and
had net additions of
over 5,000 subscribers
in the quarter. The
increase in our
installed subscriber
base is driving overall
traffic growth and is
the primary contributor
to our voice revenue
growth.
Aviation and Leasing
The increase in aviation
revenue was driven by
strong growth in
revenues from our
SwiftBroadband service,
offset by a decline in
Swift 64 revenues, due
to lower usage by
certain government
customers, including
usage related to reduced
activity in Afghanistan.
The decrease in leasing
revenue was due to a
reduction in revenue
from certain government
maritime and aviation
contracts, reflecting
contracts that were not
renewed during the
course of 2012 in line
with previous
expectations.
Inmarsat Solutions
The decrease in Inmarsat
MSS revenue at the
Inmarsat Solutions level
was driven primarily by
a combination of lower
leasing revenue and by
lower BGAN revenue
arising from Afghanistan
year-over-year. As
Inmarsat Solutions has a
disproportionately
higher share of both our
leasing and BGAN
business, the lower
revenues from these
business lines gave rise
to an overall decrease
in revenue, even though
Inmarsat Solutions
benefited from growth in
maritime revenues and
other factors that
contributed to an
overall increase in MSS
revenue at the wholesale
level.
The increase in
Broadband and Other MSS
revenue was due to
increased maritime VSAT
revenues as a result of
growth in the number of
ships using XpressLink.
At the end of the
quarter we had an
installed base of 1,229
ships using our VSAT
service, including 418
using XpressLink. There
were also increases in
equipment sales and
other engineering
revenues from the Global
Government and
Enterprise business
units, which were
partially offset by a
reduction in revenue
from our US Government
business unit. This
decrease was primarily a
result of contract
renewals at lower rates
and non-renewals and
follows the
implementation of
defence spending
reductions arising as a
result of the Federal
budget sequestration
process. For our US
Government business
unit, sequestration is
likely to result in
fewer contracting
opportunities as
programmes are
cancelled, de-scoped or
delayed, and significant
reduction in margins due
to the resultant highly
competitive contracting
environment.
During the first
quarter, growth in
Inmarsat Global EBITDA
(excluding LightSquared)
was primarily driven by
increased MSS revenues,
offset by a small
increase in net
operating costs due
mainly to higher Global
Xpress costs. The
decline in the Inmarsat
Solutions EBITDA was
driven primarily by
significant reductions
in revenue and increased
cost of sales in our US
Government business
unit.
Liquidity
At 31 March 2013, the
Inmarsat plc group had
net borrowings of
$1,493m, made up of cash
and cash equivalents of
$404m and total
borrowings of $1,897m.
Including cash and
available but undrawn
borrowing facilities,
the group had total
available liquidity of
$1,416m. We remain
fully-funded as to all
our capital needs for
the foreseeable future.
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