Inmarsat plc Reports Interim Results 2011

LONDON, August 4, 2011 -

Inmarsat plc (LSE: ISAT.L), 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.”

Inmarsat plc    

                                                 2011       2010
    (US$ in millions)                        Half year  Half year  Increase
    Inmarsat Global                              472.6      367.8     28.5%
    Inmarsat Solutions                           364.7      355.8      2.5%
                                                 837.3      723.6     15.7%
    Intercompany eliminations and
    adjustments                                 (154.4)    (152.9)
    Total revenue                                682.9      570.7     19.7%

Inmarsat Global

                                        2011      2010     Increase/
    (US$ in millions)               Half year  Half year  (decrease)
    Maritime voice services              46.9       48.9      (4.1)%
    Maritime data services              131.3      128.8       1.9%
    Total maritime sector               178.2      177.7       0.3%
    Land mobile voice services            3.3        4.0     (17.5)%
    Land mobile data services            77.0       75.8       1.6%
    Total land mobile sector             80.3       79.8       0.6%
    Aeronautical sector                  48.6       49.6      (2.0)%
    Leasing                              54.8       55.8      (1.8)%
    Total mobile satellite services     361.9      362.9      (0.3)%
    Other income                        110.7        4.9
    Total revenue                       472.6      367.8      28.5%

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.  

Inmarsat Solutions

                                        2011       2010    Increase/
    (US$ in millions)               Half year  Half year  (decrease)
    Inmarsat MSS                        214.9      215.1      (0.1)%
    Broadband and other MSS             149.8      140.7       6.5%
    Total revenue                       364.7      355.8       2.5%

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.  

Outlook

We expect new revenue resulting from our Cooperation Agreement with LightSquared to drive strong growth in our total revenue, EBITDA, and profitability in 2011.  The positive impact of the agreement with LightSquared will make 2011 the strongest year of growth in Inmarsat’s history and will more than compensate for a weaker than expected near-term performance in our Inmarsat Global MSS business.  

In our three Inmarsat Global MSS sectors, we believe we offer the current market leading services.  The success of these services is being demonstrated by consistently high levels of new terminal activations and by increasing usage trends.  However, as a result of faster than expected customer migration from higher to lower priced maritime services, together with lower customer spending levels in our land mobile and aeronautical sectors, our revenue growth in the first half has slowed and is unlikely to pick up in the second half as previously expected.  While we believe that higher numbers of network users, new product initiatives, and increased usage trends will deliver improved revenue growth in time, for 2011 we now expect our Inmarsat Global MSS revenue to be broadly flat year over year.  Consequently, our 5-year medium-term Inmarsat Global MSS revenue target is also under review.  

Due to a range of factors, including our current expectation that we will be able to record more profitability from our agreement with LightSquared in 2011, we believe our core MSS revenue outlook will not prevent us from meeting current market expectations for profit before tax for 2011.  Our outlook for capital expenditure on a cash basis is unchanged at between $450m and $550m for 2011.  

Share Repurchase Programme

Inmarsat plc is today announcing a programme of on-market purchases of its ordinary shares under the existing authority approved by shareholders at the Company’s AGM on 3 May 2011.  Subject to a number of pre-set parameters, the Company intends to repurchase its shares up to an equivalent value of $250m over the next twelve months.  The programme will be funded from available liquidity and the Company intends to cancel any repurchased shares.  

Liquidity

At 30 June 2011, the Inmarsat plc group had net borrowings of $1,162.5m, made up of cash and cash equivalents of $218.8m and total borrowings of $1,381.3m.  Including cash and available but undrawn borrowing facilities, the group had total available liquidity of $1,580.8m.  During the first half, we completed a $700m financing facility with Ex-Im Bank and replaced our previous $500m Senior Credit Facility with a new 5-year $750m Senior Credit Facility.  Total drawings under the Ex-Im Bank Facility and the new Senior Credit Facility were $88.0m and $nil, respectively at 30 June 2011.  

Our Financial Reports

Inmarsat Group Limited, our wholly-owned subsidiary, today reported unaudited consolidated financial results for the three months ended 30 June 2011.  A copy of the full financial report for the Inmarsat Group Limited can be accessed via the investor relations section of our website.

Other Information

Inmarsat management will discuss the results announced today and other financial and business information in a conference call on Thursday, 4 August at 9:30am London time, (United States 4:30am EST).  To access the call please dial +44 (0)20 7162 0125.  The conference id for the call is 899711.  The call will be recorded and available for one week after the event.  To access the recording please dial +44 (0)20 7031 4064 and enter the access number 899711.  The call will also be available via a webcast, to access the webcast please go to www.inmarsat.com/webcast.

Forward-looking Statements

Certain statements in this announcement constitute “forward-looking statements”.  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 or 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.

Contact: Inmarsat plc, London, UK, Investor Enquiries, Simon Ailes, Tel: +44(0)20-7728-1518, simon_ailes at inmarsat.com; Media Enquiries, Chris McLaughlin, Tel: +44(0)77-9627-6033, christopher_mclaughlin at inmarsat.com