News Column

Inmarsat Offsets US Government Slowdown, But Warns Of New Service Delay

August 5, 2014

Steve McGrath

LONDON (Alliance News) - Satellite company Inmarsat PLC Tuesday reported lower pretax profit as it was hit by lower US government spending and higher depreciation charges, but revenue and operating profits rose, driven by demand from the maritime and aviation sectors.

However, it also warned that it would be hit by the recent failure of a rocket launch vehicle, which will delay the launch of the second and third of its Inmarsat-5 satellites and hence the launch of its new Global Xpress services on a global basis.

The company reported a pretax profit of USD168.3 million for the six months to June 30, down from USD185.5 million a year earlier, mainly due to higher depreciation costs as new satellite entered service and started to depreciate and due to an adjustment for the Stratos business it previously sold.

Its earnings before interest, tax, depreciation and amortisation rose to USD369.7 million, from USD329.2 million a year earlier, as revenue rose to USD652.3 million, from USD640.3 million, driven by maritime and aviation demand, and it cut operating costs by USD28.5 million.

The company, whose satellites provide mobile communications across the world, launched the first satellite for its new Global Xpress service last December, and the service was taken up by US government customers from the start of July. However, the launch of the second and third satellites, which would have expanded the service across the globe, has been delayed after a launch vehicle for the Russian-built Proton rocket failed.

"Whilst our medium-term expectations for the take-up of GX services remain unchanged, the recent Proton launch failure has delayed the launch of the second and third Inmarsat-5 satellites and hence the start of GX services on a global basis. We therefore expect that GX and, therefore, Inmarsat Global MSS revenues, will be correspondingly lower than previously expected over 2014-16," the company said in its earnings statement.

It added that it still expects Inmarsat Global MSS revenues to fall within the 8% to 12% compound annual growth rate range set for 2014-16 in the company's medium-term guidance.

"The overall trading environment for our L-band and other business lines remains positive, except in our US Government business unit where, as previously stated, trading remains difficult in light of customer budget pressures and other medium-term factors," it added.

Still, the company raised its interim dividend by 5% to 18.68 cents.

Inmarsat shares were down 1.5% at 711.00 pence early Tuesday, the third-biggest decline in the FTSE 250.

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Source: Alliance News

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