Inmarsat did not reconfirm its growth trend this quarter, on the back of the continuing client shift in Maritime, while Aviation suffered from a high comparison basis. The company is expecting its delisting to happen by the end of this year.
Inmarsat remains the sole company of our coverage enjoying top-line growth in the satellite business. The strategic focus of Inmarsat on the mobility business, i.e. its aviation segment, is mainly responsible for this success.
Inmarsat’s results came in roughly in line with our expectations, keeping its ongoing trend of vessel migration in Maritime which weighed on its results, while Aviation enjoyed very positive momentum.
Key financial facts
Q4 group revenue was up 7.6% to $378.7m and Q4 EBITDA grew by 14.6% to $190.6m
FY revenues grew by 5.3% yoy to $1,465m (above consensus at $1.45bn)
EBITDA was up 4.2% yoy to $770m (above consensus)
FY18 profit after tax was $125m, down 32.4% yoy (below consensus, $148m)
Inmarsat targets a mid single-digit percentage growth in revenues over the five-year period of 2018-22.
FY19 revenues, excluding Ligado, should fall in the range of $1.3bn to $1.4bn, up 6% at mid-range.
Annual GX revenues at a run rate of $500m by the end of 2020.
Capex should range from $500m to $600m per year over 2019-20, then should decrease thereafter, starting in the range of $450m to $550m by 2021.
Inmarsat published this morning its Q3 results.
Group revenues (excluding Ligado) were up 3.9% yoy to $336.4m, driven by Aviation. This was in line with the consensus. The strong growth in Aviation (+34%) is, however, overshadowed by a disappointing decline in Maritime (-5.7%).
EBITDA was up 7.9% yoy to $173.6m, with an EBITDA margin of 55.9% (vs. 54.3%. Q3 17), driven by a strong EBITDA performance in Aviation and lower Central Services costs. This came in largely above consensus which expected €152m (excluding Ligado).
Revenue and EBITDA for FY18 are now expected to be at least in line with current market consensus of $1.325m and $610m, respectively.
The medium-term guidance was left unchanged.
Q1 revenue increased by 4.8% yoy (like in Q4), driven by growth in Aviation (+39%) and Enterprise (+11%), while the Government segment (-9% only) recorded lower contracted revenue from Boeing.
EBITDA decreased, however, by only 4.5% yoy and was flat excluding the adverse impact of currency movements on indirect costs (it was still down by 17% yoy in Q4 due to a one-off US Government airtime contract in 2016). The lower margin reflects the changes in revenue mix, particularly in Government.
The outlook is unchanged.
So, globally, a reassuring release, particularly on the EBITDA front which is better than expected and no longer declining at constant FX.
Inmarsat released a mixed set of results, marked by well-flagged tough comparatives in Government and the recovery of the Maritime division in Q4, the halving of dividends, and the confirmation of the 2018 revenue and leverage objectives.
Inmarsat released a rather reassuring set of Q3 results, marked by the stabilisation of the Maritime division although hampered by the unexpected return to negative sequential growth of FleetBroadband.
Revenue up 4.8%, to $358.3m (consensus*: $346.4m)
Maritime stable yoy, at $142.7m ($140.8m)
EBITDA down 6.5%, to $191.3m ($183.8m)
Adjusted EPS of 12c down from 20c (11.8c)
Net debt down $159.2m, at $1,952m
Outlook broadly unchanged
The main parts of management’s guidance has been confirmed (FY18 revenue, capex, GX contribution, leverage) while the FY17 targeted revenue range has been narrowed from $1,200-1,300m to $1,225-1,275m, excluding Ligado, in line with our own $1,256m expectation.
* internal consensus
Inmarsat released a mixed set of Q2 results, marked by short-term headwinds in Maritime partly offsetting the strong growth in Aviation and Government.
Q2 revenue up 7.7%, at $356m (company consensus: $344.2m)
Q2 EBITDA down 3.6%, to $195m ($198.8m)
Q2 Maritime down 5%, to $139.3m ($142.7m)
Interim dividend up 5%, to $0.2162 (cash or share)
Inmarsat released a set of Q1 results broadly in line with expectations and confirmed their guidance.
Revenue up 11.3% (+7.5% excluding Ligado), to $332.2m, 2.4% above consensus
EBITDA up 9.2% (+1.8% excluding Ligado), to $181.5m, 3.9% above consensus
Adjusted PAT up 14.5%, to $52.2m
Net debt broadly unchanged at $1,919.4m
Inmarsat released a mixed bag of full-year results, marked by a solid Q4, the lowering of the 2018 outlook and outstanding cash generation.
For the full year:
Revenue reach $1.33bn, in line with guidance but 2% above the consensus.
EBITDA reached $795m, 4% above market expectations.
Net income was $243m, in line with market expectations.
The fourth quarter was strong, with a 7% increase in revenue and a 9.2% increase in EBITDA, driven by very strong growth in Government and Aviation services, partly offset by a slight decline in Maritime and, unsurprisingly, a stronger decline in Enterprise.
Lastly, the board proposed a final dividend increase of 5% to $0.34 per share.
The company revised its 2018 guidance downward from the previous $1,450-1,600m range (excluding Ligado) to a new $1,300-1,500m, arguing that there will be pressure on customer expenditure, increasing competition and the arrival of fresh capacity in some of the company’s markets. This new guidance is in line with current market expectations (c.$1,389) as well as AV’s forecasts ($1,335m).
On the other hand, the group gave a new $1,200-1,300m guidance (excluding Ligado) for 2017. This is in line with our forecasts ($1,226m) and the market’s expectations (c.$1,270m).
All other management forecasts stay unchanged, including the $500-600m capex guidance for 2017-18, annual GX revenues of $500m by the end of 2020 and the 3.5x maximum leverage.
Lastly, management also reminded that EBITDA margins were to be negatively impacted by a ramp-up of the lower-margin In-Flight Connectivity (IFC) business.
The group confirmed the expected IFC deal with IAG this morning. The airline group will be Inmarsat’s launch customer for its European Aviation Network (EAN) and plans to equip over 300 aircraft with broadband services, aiming to have 90% of its short-term fleet completed by early 2019.
The group also expects to be able to launch the I-5 F4 satellite by the end of April, to provide in-orbit redundancy and additional growth opportunities.
As rates rise, "yieldy" stocks require careful consideration. Sustainability/track record key.
Inmarsat released a good set of Q3 results.
During the third quarter, total group revenue was up 5.8% at $341.9m. EBITDA was up 13.5% at $204.6m. Profit after tax was down 13.3% at $53.9m on the back of higher depreciation and one-off financial expenses.
The performance was driven by the strong Government vertical which was up 9.8% and seems to be resisting well to the current trends in this market. The decline in Enterprise was much lower compared to H1, at -5.3% versus -8.6% during the first half, and the Aviation business was broadly in Line with a double-digit growth of 10.1%. The only negative part comes from the Maritime market which was down by almost 5%.
Revenue guidance for 2016 is unchanged at $1,175-1,250m excluding Ligado. Revenue guidance for 2018 is similarly unchanged at $1,450-1,600m excluding Ligado but including I-5 F4.
The Group’s guidance for Global Xpress revenue also remains unchanged, with annual GX revenues of $500m expected by the end of 2020. Note this guidance does not include any contribution from I-5 F4.
Capex guidance for 2016 is revised down to $400-500m, mainly reflecting the slippage of the launch of I-5 F4 into 2017 following the SpaceX rocket explosion earlier this year. Capex guidance for 2017 and 2018 is currently unchanged at $500-600m.
Guidance on gearing is also unchanged with net debt/EBITDA expected to remain under the 3.5x level.
The company said it remained confident of being able to launch the I5-F4 satellite early in 2017 while not excluding looking for alternatives to the SpaceX rocket.
It also confirmed the refinancing of part of the debt, through the issuance of $650m new 3.9% convertible bonds due in 2023 and $400m of 6.5% senior notes due in 2024. The proceeds have been used to repurchase convertible bonds due in November 2017 and should help to address upcoming debt repayments.
For the first time, the company provided investors with the option of a scrip interim dividend, 9.54% subscribed. This led to the creation of 946,283 new shares (0.21% of issued share capital).
Inmarsat had its capital markets day during which management provided an overview of the satcom market, with a quick analysis of supply, demand and technology. Management then made two complete presentations focusing on the Maritime and Aviation markets.
No financial details were given as the company has already entered into its quiet period, preceding the 3 November Q3 results.
All in all, no game-changing information was provided during the presentations and management confirmed its confidence in its ability to deliver growth in the future. At the end of the presentation, the share price was up c.1.5%, at 710p.
Inmarsat released positive first half results.
For the first half, revenue reached $629m, up 2.1% and slightly above the $626.5m of consensus. EBITDA reached $368.4m (58.6% margin, up 3 points yoy) while net profit was $122.4m, down by $9.2m due to increased depreciation caused by the GX constellation entry into full commercial service in 2015.
For the second quarter, revenue reach $330.4m, up 6.1% and slightly above the $322.5m consensus. EBITDA reached $202.2m (61.2% margin, up 7.9 points yoy).
At 30 June 2016, net debt stood at $1,923.9m vs $1,985.8m in December 2015.
The company re-iterated its financial guidance.
In line with its dividend growth policy, the board announced an increased interim dividend of 20.59 cents per share for 2016 (vs 19.61 cents in 2015).
Inmarsat announced it had landed a third major contract for which Navarino, a provider of satcom solutions to the merchant market, commits over 1,200 vessels onto the new Fleet Xpress service during a 6-year period. This will add to the 4,000 vessels won in June 2016 thanks to the Marling and SpeedCast agreements (see our 14 June Latest).
The company also announced the lifting of the stop-work order issued on the US Navy contract due to a bid protest filed on the initial award.
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CAP-XX Ltd* (CPX.L, 3.1p/£10.1m) | Gfinity plc* (GFIN.L, 1.675p/£12.0m) | MTI Wireless Edge Ltd* (MWE.L, 38.5p/£33.8m) | Newmark Security plc* (NWT.L, 1.05p/£4.9m) | Mirada plc* (MIRA.L, 95.0p/£8.5m)
Companies: CPX GFIN MWE NWT MIRA
For the six months to 30 September 2019 (H1 FY20) AdEPT Technology Group reported Revenue +26.4%YoY to £30.8m inclusive of acquisitions, with organic growth of +2.5%YoY. Fixed Line Communications comprised 18.5% (£5.7m), -10.7%YoY, whilst Managed Services grew 39.5%YoY to £25.1m inclusive of the acquisition of Advanced Computer Systems UK Ltd. (ACS) to reach 81.5% of revenue; underlying organic growth was 7.9%YoY. EBITDA (adj.) of £6.1m grew 18.3%YoY; a 19.8% margin. The interim dividend was 5.1p/share (H119: 4.9p) +4%YoY. Period-end senior net debt was £31.5m (FY19: £27.1m) 2.6x EBITDA (FY19: 2.5x), with cash at £4.6m.
Companies: Adept Technology
The Coronavirus pandemic is a human tragedy of vast proportions – as well as the terrible human toll, COVID-19 has led to economies across the globe going into physical lockdown and financial freefall. Entire populations are adapting to the “stay at home” edict, to safeguard the vulnerable – and some of these changes will lead to long-lasting or perhaps permanent changes in the way we live or work. This note describes some of our client companies whose business models are well adapted to these changes, or who might see a change in long-term structural demand.
Companies: AMO BGO FDM GAMA KAPE LOOP TERN ZOO
Following the news that T-Mobile Czech Republic and Slovak Telecom have deployed 24i’s Smart Operator suite, Amino has confirmed a contract win with streaming video service Topic for 24i’s Smart OTT and Smart BACKSTAGE products. The releases do not comment on their potential values to Amino, and we leave forecasts unchanged. However, against the backdrop of ongoing COVID-19-driven global macro uncertainty, in our view the announcements represent welcome positive news flow. The contracts demonstrate further progress in both Amino’s move towards a more software-led business model and the group’s ability to address a more diverse client base.
Companies: Amino Technologies
Pebble Beach Systems is a leading developer and provider of playout automation and IP-based solutions to over 150 customers across the global broadcast industry. Its portfolio of proprietary software solutions is central to the playout of uninterrupted broadcast, for both live and pre-recorded content, and importantly enables broadcasters to automate and streamline multi-channel playout. Via its cloud-based solutions, the company also supports broadcasters and operators as they transition from traditional hardware-based infrastructure to IP-based systems, for a more flexible playout environment. As the industry enters a pivotal decade for the transition to IP, Pebble Beach Systems is well positioned to benefit from the increased traction across the market. FY19 results show adjusted PBT growth of 89%, EBITDA growth (LFL, pre IFRS16) of 47% and revenue growth of 22%, with net debt continuing its descent, now down to £8.4m (FY18: £9.4m). While COVID-19 introduces uncertainty over growth, and we do not yet offer forecasts, the group’s existing customer base is benefiting from Pebble Beach’s automation and remote support as end-user demand for TV booms. We look forward to the post crisis environment to establish forecasts and map the continuation of the evident momentum demonstrated in FY19.
Companies: Pebble Beach Systems Group
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
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Bill McDermott stood down on Friday after a decade building up SAP as the world's leading enterprise software company, handing the task of completing its transition to cloud computing to new co-CEOs Jennifer Morgan and Christian Klein. SAP announced the management overhaul, with immediate effect, after rushing out third-quarter results that showed it gaining traction in its drive to offer a more streamlined range of services and boost profitability. The company’s stock has climbed 21% this year. It’s up 75% in the past five years, topping rival Oracle, which is up 46%, and the S&P 500′s 54% gain.
Companies: EVRH TRAK CPX CALL ECK IMMO LOOP NET SEE TCM TRCS QTX VRE
FY 2019 was, as expected, a strong year for Gamma in financial terms with growth in Adjusted EBITDA of 31% a touch higher than we were expecting. Notably, that was achieved in a period where management has been pursuing its updated strategy which included investing in future growth and spending time assessing and undertaking acquisitions. The Group delivered well on its strategic aims during the year and it has announced further acquisitions in 2020. Gamma retains a strong balance sheet and we expect to see more deals in the future. It saw strong growth in the UK while its Dutch businesses were integrated and DX Groep saw a pick-up in H2. The near term business outlook is somewhat overshadowed by Covid-19 and we exercise a degree of conservatism as we upgrade our estimates to reflect the FY 2019 performance and the recent acquisitions. Nonetheless, the combination of organic and acquired growth produces a 5% upgrade in Adj. EBITDA for the current year which anticipates 15% growth on FY 2019’s strong number.
Companies: Gamma Communications
FY 2019 saw a strong financial and operational performance. The management team is working hard to optimise its sales strategy and pursue further cost reductions. The results of its efforts are already visible in much improved financials: growth in all the ongoing businesses and in all regions; and stronger margins from better revenue mix and streamlining. The sale of Automotive in February 2019 focused Telit on Industrial IoT, removed a heavy R&D burden and left the group very well-funded. Cash is to be partially returned to shareholders depending on the developing Covid-19 situation. Even in an uncertain times, the year leaves Telit very well placed with tremendous upside to build LT value through numerous opportunities as a global leader in the growing IoT market.
Companies: Telit Communications
Accelerated book build, board change and JSOP
Telit has moved to preserve its profit levels during the COVID-19 pandemic. The widespread lockdown of unknown duration is likely to slow some of its YoY revenue growth, and we trim our FY 2020 revenue expectations, although we do still continue to expect LFL growth (excluding the two months of Automotive in FY 2019). Despite its significant cash reserves from the disposal, management is prudently adopting a cost-reduction plan to ensure the company’s earnings are maintained at the targeted level. Notably this involves a temporary 15% salary reduction for senior management and a reduction in all areas of discretionary spending, including opex and capex. Strategic plans (such as long-term product development and the movement of production outside China) will be unaffected. We are pleased to hear the supply chain remains steady with minimal disruption in module production as the lockdown across Asia is partially lifted. At this stage, we leave FY 2021 forecasts unchanged, given a strong market position.
UKOG has implemented operating cost reductions following on from the grant of long-term production consent at the company's Horse Hill field (85.635% UKOG). Amongst other measures the company has been able to renegotiate long-term equipment and services contracts at reduced rates. All-in field operating costs have been lowered by circa $7/b to circa $12/b of oil produced, according to the company.
Companies: UK Oil & Gas Investments
Panoro Energy (PEN NO)C: Initiating coverage | 88 Energy (88E LN/AU): Acquisition in Alaska | BP (BP LN): Transaction in Alaska with Hilcorp renegotiated | Columbus Energy Resources (CERP LN): Oil discovery in Trinidad | Premier Oil (PMO LN) and Rockhopper Exploration (RKH LN): Sea Lion farm out (Falklands) exclusivity period extended | BP (BP LN): 1Q20 results | Equinor (EQNR NO): Dry hole in Norway | Getech (GTC LN): Business update | Hurricane Energy (HUR LN): Business update in the UK North Sea |IGas Energy (IGAS LN): Shutting some production in the UK | Lundin Energy (LUP SS): 1Q20 results | OKEA (OKEA NO): 1Q20 update in Norway | OMV (OMV AG): 1Q results | Premier Oil (PMO LN): Court approves schemes of arrangement | Royal Dutch Shell (RDSA/B LN): 1Q20 results and dividend reduction | RockRose Energy (RRE LN): Operational update in the UK | UK Oil & Gas (UKOG LN): £1.275 mm equity raise | Caspian Sunrise (CASP LN): Operating update in Kazakhstan | Exillon Energy (EXI LN): February and March production in Russia | Nostrum Oil & Gas (NOG LN): 1Q20 update in Kazakhstan | PetroNeft (PTR LN): Operations update | Genel Energy (GENL LN): Update in Kurdistan – While negotiations are ongoing the KRG will not exercise the notice of an intention to terminate the Bina Bawi PSC | ShaMaran Petroleum (SNM CN): Business update in Kurdistan | Tethys Oil (TETY SS): Production reduction in Oman | Total (FP FP): Dry hole in Lebanon | Aminex (AEX LN) and Solo Oil (SOLO LN): Licence extension in Tanzania | Far Limited (FAR AU): Update in Senegal | Lekoil (LEK LN): Final payment with Nigerian partner rescheduled | Orca Exploration (ORC.A/B CN): FY19 results | Savannah Energy (SAVE LN): Financial and operating update in Nigeria | San Leon Energy (SLE LN): Special dividend | Seplat Petroleum (SEPL LN): 1Q20 results
Companies: 88E AEX PEN BP/ CASP CERP EQNR EXI FAR TTA HUR GENL GTC IGAS LEK LUPE NOG OKEA OMV ORC.B PMO PTR RKH RDSA RRE SAVE SLE SEPL SNM TETY SOLO UKOG
The Board has finally decided to suspend its final dividend for 2019/20 and all dividends for 2020/21. This move is structural and not really linked to the Covid19 crisis in that it is to invest in FTTP and 5G, and to fund a major new 5-year modernisation programme.
These announcements are a first buy signal although the recovery will take time and the group must now stabilize its revenues which will not be easy given the Covid19 pandemic context.
Companies: BT Group
Quite a good Q4 supported by improving commercial momentum in Europe. The annual EBITDA grew eventually by 2.6% yoy reflecting the cost programme’s success.
The €0.09 dividend is maintained.
Vodafone is more highly indebted after its deal with Liberty-Global, but its dividend (cut last year) seems now more in harmony with its balance sheet. Besides, the monetisation of its infrastructure is continuing. Given therefore the slight growth Vodafone should offer in the coming years, we maintain our Buy recommendation on the stock.
Companies: Vodafone Group