TIDMISAT
RNS Number : 6863G
Inmarsat PLC
08 November 2018
Inmarsat plc reports Third Quarter Results 2018
Diversified growth portfolio continues to drive improved results
- on track to deliver growth in Revenue, EBITDA and Free Cash Flow
for the Full Year
London, UK: 8 November 2018. Inmarsat plc (LSE: ISAT.L),
("Inmarsat", the "Group"), the world leader in global mobile
satellite communications, today published the following unaudited
information for the third quarter, and nine months, ended 30
September 2018.
Financial Headlines:
Third Quarter ended 30 Nine months ended 30 September
$ in millions September
2018 2017 (restated)(1) Change Change 2018 2017 Change Change
(%) (restated)(1) (%)
----------- -------
Group revenue 369.3 356.2 13.1 3.7% 1,086.5 1,039.9 46.6 4.5%
----------- ------------------ ------ ------- ------- -------------- ------ -------
Maritime 135.0 143.1 (8.1) (5.7%) 417.1 422.9 (5.8) (1.4%)
----------- ------------------ ------ ------- ------- -------------- ------ -------
Government 95.2 88.4 6.8 7.7% 278.3 275.9 2.4 0.9%
----------- ------------------ ------ ------- ------- -------------- ------ -------
Aviation 68.2 50.9 17.3 34.0% 183.7 134.1 49.6 37.0%
----------- ------------------ ------ ------- ------- -------------- ------ -------
Enterprise 34.6 38.2 (3.6) (9.4%) 98.6 100.5 (1.9) (1.9%)
----------- ------------------ ------ ------- ------- -------------- ------ -------
Other(2) 36.3 35.6 0.7 2.0% 108.8 106.5 2.3 2.2%
----------- ------------------ ------ ------- ------- -------------- ------ -------
EBITDA(3) 206.5 193.3 13.2 6.8% 579.5 573.0 6.5 1.1%
----------- ------------------ ------ ------- ------- -------------- ------ -------
PAT 227.7 112.7 115.0 102.0% 95.9 151.5 (55.6) (36.7%)
----------- ------------------ ------ ------- ------- -------------- ------ -------
Adjusted
PAT (3,4) 46.5 56.3 (9.8) (17.4%) 122.0 167.3 (45.3) (27.1%)
----------- ------------------ ------ ------- ------- -------------- ------ -------
Q3 2018 operational highlights:
-- Group Revenue (ex Ligado) increased by $12.6m, or 3.9%, to
$336.4m, continuing to reflect the combined strength of the Group's
diverse portfolio and the delivery of further strategic proof
points
o Maritime:
- Strong revenue and market share growth through Fleet Xpress
("FX") in fast-growing, high value VSAT segment
- FleetBroadband ("FB") revenues declined, reflecting customer
migration to FX and increased VSAT competition
o Government:
- Strong revenue growth, particularly from our non-US government
business
o Aviation:
- Strategic alliance with Panasonic to strengthen our drive for
future global market leadership in IFC
- Double digit revenue and EBITDA growth, with an improved
margin outlook for FY 2018
o Enterprise:
- Best quarter so far this year, against a tough, event-driven,
comparative
-- Group EBITDA (ex Ligado) increased by $12.7m, or 7.9%, to
$173.6m reflecting higher revenues, particularly from Aviation, and
lower costs
-- Updated 2018 guidance Revenue and EBITDA for FY 2018 (ex
Ligado) are expected to be at least in line with current market
consensus (Revenue: $1,325m, EBITDA: $610m)
-- Medium term guidance for the Group unchanged
(1) 2017 figures have been restated throughout this announcement
to reflect the adoption of IFRS15 and the reclassification of short
term deposits. The Group has also adopted IFRS16 and IFRS9 as of 1
January 2018. Please refer to Appendix 2 of this document for
further details.
(2) "Other" revenue comprises revenue contribution from Central
Services and Ligado Networks. See page 10 for more details.
(3) In response to the Guidelines on Alternative Performance
Measures ('APM's) issued by the European Securities and Markets
Authority ('ESMA'), we have provided additional information on the
APMs used by the Group including definitions and reconciliations to
statutory measures within Appendix 1 of this document.
(4) Adjusted PAT is defined as Profit after Tax excluding the
non-cash impact of the unrealised movement in the fair value of the
conversion liability component of the 2023 convertible bond and the
realised movement in the loss on redemption of the 2017 convertible
bonds in 2016. This is an APM.
Rupert Pearce, Chief Executive Officer, commented on the
results:
"Inmarsat's improved results continue to reflect the overall
strength of our diverse portfolio, which provides balance,
operational synergy and protection against individual market
cycles.
"In Maritime, we continue to build a strong market position in
the fast-growing, key market segment of the future, VSAT, through
Fleet Xpress, which has now established itself as the leading VSAT
service for the international maritime market. In the mid-market,
the pace of migration to VSAT continues to accelerate and we must
continue to work hard to ensure that as many of our FB customers as
possible are migrated to FX in the coming years. Both government
businesses performed well, reflecting our global leadership
position in this sector and highly diversified product portfolio.
In Aviation, the major news during the quarter was our strategic
alliance with Panasonic, which we expect will greatly accelerate
our drive to establish a sustainable global market leadership
position in IFC. In addition, we again reported double-digit
revenue growth in both our IFC and core businesses in Aviation.
Enterprise continued to perform well in its legacy product base,
against a tough comparator, while making good progress in
establishing strong foundations for future high growth,
particularly in the area of satellite-led Industrial IoT".
"Inmarsat remains at the forefront of our chosen markets,
leveraging the strength of our established market position,
continuing to deliver an exciting technology roadmap and taking a
highly disciplined approach to costs and capital expenditure. As a
result, the Group remains well placed to continue delivering
medium-term growth in revenue, EBITDA, and free cash flow."
Medium term guidance
The Board remains confident about the future prospects for the
Group, with Inmarsat's unchanged medium term financial guidance (ex
Ligado) being as follows:
-- A target of mid-single digit percentage revenue growth on
average over the next five years, with EBITDA and free cash flow
generation improving steadily*;
-- Annual GX revenues at a run rate of $500m by the end of 2020;
-- Capex of $500m to $600m per annum for 2018 to 2020. Capex is
expected to meaningfully moderate after 2020 reflecting completion
of the I-6 satellite programme and the impact of new technologies;
and
-- Net Debt: EBITDA to normally remain below 3.5x.
The Group manages a diverse growth portfolio of businesses and
products that are, in aggregate, expected to deliver the guidance
above, with the portfolio mix expected to continue to evolve as
individual markets fluctuate over the medium term.
We continue to believe that the "focused diversity" of our
business, with a small but diverse set of core end markets that
offer scale and growth potential, and where we lead with
sustainable differentiation, will remain a key strength for
Inmarsat going forward.
Results conference call
Inmarsat management will discuss the third quarter results in a
conference call on Thursday 8 November at 09.00am UK time. The call
can be accessed by dialling +44 (0) 330 336 9127 (from the UK and
Europe) or +1 323-794-2093 (from the US), with a passcode of
1756307 and is also accessible via this link:
https://edge.media-server.com/m6/p/x5vbd2a6.
Contacts:
Investor Enquiries: Media Enquiries:
Rob Gurner Jonathan Sinnatt
Tel: +44 (0)20 7728 1518 Tel: +44 (0)20 7728 1935
rob.gurner@inmarsat.com jonathan.sinnatt@inmarsat.com
* Excluding any impact of ongoing exceptional tax matter
discussed on page 11
Forward looking Statements
This announcement contains 'forward-looking statements' within
the meaning of the US 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 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.
OPERATING AND FINANCIAL REVIEW
The following is a discussion of the unaudited consolidated
results of the operations and financial condition of Inmarsat plc
(the "Company" or, together with its subsidiaries, the "Group") for
the period ended 30 September 2018. This should be reviewed
together with the whole of this document including the historical
consolidated financial results and the notes. The consolidated
financial results were prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union. Inmarsat has adopted IFRS15, 16 and 9 for the financial year
ending 31 December 2018, (with 2017 numbers being restated to
reflect the adoption of IFRS15). Additionally a reclassification of
short-term deposits has been made to better reflect the
requirements of IAS7.
In addition to IFRS measures we use a number of Alternative
Performance Measures (APMs) in order to provide readers with a
better understanding of the underlying performance of our business,
and to improve comparability of our results for the periods
concerned. More detail on IFRS and APMs can be found in the
Appendices of this report.
Introduction
Overall, Inmarsat produced another improved performance in the
third quarter, as we continued to grow revenues, establish new
strategic relationships, build new capabilities and deliver our
technology road map whilst tightly managing our costs and capital
expenditure.
Group Financial Highlights
Third Quarter ended 30 Nine months ended 30
September September
($ in millions) 2018 2017 (restated) Change 2018 2017 (restated) Change
------------------- ------- --------------- ------- ------- --------------- -------
Revenue
Satellite services 336.4 323.8 3.9% 988.8 943.8 4.8%
Ligado revenue 32.9 32.4 1.5% 97.7 96.1 1.7%
------------------- ------- --------------- ------- ------- --------------- -------
Total revenue 369.3 356.2 3.7% 1,086.5 1,039.9 4.5%
Direct costs (61.4) (47.2) (30.1%) (179.6) (133.7) (34.3%)
------------------- ------- --------------- ------- ------- --------------- -------
Gross Margin 307.9 309.0 (0.4%) 906.9 906.2 0.1%
Indirect costs (101.4) (115.7) 12.4% (327.4) (333.2) 1.7%
------------------- ------- --------------- ------- ------- --------------- -------
EBITDA 206.5 193.3 6.8% 579.5 573.0 1.1%
EBITDA margin % 55.9% 54.3% 53.3% 55.1%
------------------- ------- --------------- ------- ------- --------------- -------
Cash capex 157.5 101.0 (55.9%) 415.3 409.2 (1.5%)
------------------- ------- --------------- ------- ------- --------------- -------
Group revenue in Q3 2018 increased by $13.1m, driven mainly by
growth in Aviation. Ligado revenue was little changed at $32.9m
(2017: $32.4m). GX-generated airtime and related revenues were
$171.9m for the year-to-date (YTD 2017: $102.1m), including $61.7m
in Q3 2018, (Q3 2017: $42.3m).
Direct costs increased by $14.2m, mainly reflecting the
short-term addition of low margin equipment sales to help capture
further market share and deliver long-term airtime revenues in
Aviation. Indirect costs were $14.3m lower, reflecting both timing
issues and reduced expenditure in a number of areas.
EBITDA increased by $13.2m and EBITDA margin increased to 55.9%,
from 54.3% in Q3 2017.
Cash capex was $56.5m higher in the quarter, mainly reflecting
the timing of investment in major infrastructure projects, in
particular the GX5 and I-6 satellites.
Maritime
Market overview
In Maritime, the market is now quickly adopting broadband
connectivity, with the pace of adoption being faster, and more
disruptive, than previously expected in some areas. We continue to
compete very strongly, winning material share in the key, high
bandwidth, VSAT market segment, with c. 60% of new installations in
the market this year being with our GX-based VSAT product, Fleet
Xpress ("FX"). FX is very well positioned as the leading mobile
broadband proposition in the Maritime market and we consequently
expect that our market share in VSAT, which has grown from c. 15%
in 2016 to c. 25% today, will continue to build strongly. Over the
medium term, this key market segment is forecast to be the area of
highest revenue growth and highest ARPU. The robust revenue growth
and market share acquisition strategy that Inmarsat is successfully
delivering is therefore fundamental to the longer term growth of
Maritime revenues.
The growth in the VSAT market segment is being fuelled not only
by new vessels and but also by vessels migrating from the
mid-market where Inmarsat has historically held substantial market
share through its FleetBroadband ("FB") product. Whilst we are
retaining a large share of FB customers who migrate to VSAT, we are
currently also losing a larger number than expected to competitor
offerings, including newly emerged, low-end VSAT offerings. We are
working hard to address this competitive dynamic through enhanced
product offerings, targeted price incentives and new sales
strategies, which are progressively being introduced in both FB and
FX.
Q3 2018 results
Third Quarter ended 30 Nine months ended 30
September September
($ in millions) 2018 2017 (restated) Change 2018 2017 (restated) Change
------------------------ ------ --------------- ------- ------ --------------- -------
Revenue 135.0 143.1 (5.7%) 417.1 422.9 (1.4%)
Direct Costs (17.8) (19.7) 9.6% (61.4) (60.3) (1.8%)
------------------------ ------ --------------- ------- ------ --------------- -------
Gross Margin 117.2 123.4 (5.0%) 355.7 362.6 (1.9%)
Indirect costs (8.5) (9.1) 6.6% (29.1) (25.6) (13.7%)
------------------------ ------ --------------- ------- ------ --------------- -------
EBITDA 108.7 114.3 (4.9%) 326.6 337.0 (3.1%)
EBITDA margin % 80.5% 79.9% - 78.3% 79.7% -
Cash capex (13.0) (11.7) (11.1%) (37.0) (35.0) (5.7%)
------------------------ ------ --------------- ------- ------ --------------- -------
Business Unit Operating
Cash Flow 95.7 102.6 (6.7%) 289.6 302.0 (4.1%)
------------------------ ------ --------------- ------- ------ --------------- -------
Maritime revenue declined by $8.1m with further strong growth
from VSAT products, including FX, ($7.3m) being offset by lower
revenue from FB ($11.6m) and other mainly legacy products
($4.1m).
Direct costs decreased by $1.9m reflecting leased capacity cost
savings from the migration of XpressLink ("XL") vessels to FX and
improved revenue mix. Indirect costs fell by $0.6m in Q3,
reflecting lower marketing costs
EBITDA was consequently $5.6m lower but EBITDA margin increased
to 80.5%, from 79.9%.
Maritime capex (success-based capex supporting both customer
installations in FX and XL migrations) increased marginally to
$13.0m.
Product performance
Revenue Number of vessels Average Revenue
per User ("ARPU")
Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017
--------------- ------- ------- --------- -------- --------- ---------
FleetBroadband $75.0m $86.6m 33,509 36,809 $736 $777
--------------- ------- ------- --------- -------- --------- ---------
VSAT $39.0m $31.7m 5,772 3,960 $2,332 $2,811
--------------- ------- ------- --------- -------- --------- ---------
Fleet One $1.7m $1.3m 3,965 2,572 $105 $109
--------------- ------- ------- --------- -------- --------- ---------
Other products $19.4m $23.5m - - - -
--------------- ------- ------- --------- -------- --------- ---------
In VSAT, revenues grew strongly, rising by 23.0% in Q3 2018,
with 5,772 installed VSAT vessels at the end of the quarter (4,726
of which were FX vessels) and a stable installation backlog of c.
650 vessels.
VSAT ARPU continues to reduce as our distribution channel brings
new customers but also provides a greater proportion of new VSAT
revenues (11% of installed vessels at Q3 2017, 27% at Q3 2018) at
wholesale rather than retail pricing.
FX installations in Q3 of 604 vessels were at more normal levels
following a particularly strong Q2 prior to the end of a short-term
promotion. The proportion of completely new customer FX
installations remained high at over 20% during the quarter.
FB revenues fell by 13.4% in Q3, with FB vessels declining by
3,300 vessels. Of the FB vessels lost, the overwhelming majority
transitioned to VSAT services, including more than 1,400 vessels
migrating to FX. The residual losses were to scrappage, L-band
competition and transition to Fleet One. FB ARPU declined by 5.3%
to $736 per month, reflecting the migration to VSAT being weighted
towards the higher usage, higher ARPU customers.
Fleet One continues to build, with airtime and equipment revenue
increasing by 31% to $1.7m and c. 300 new vessels being installed
in Q3. Our other, mainly low margin and legacy products continued
to decline at a similar rate to prior quarters.
Government
Market overview
Whilst the market remains competitive and the pricing
environment remains intense, Government expenditure on commercial
satcoms is expected to grow steadily over the medium term in both
Ka-band and L-band applications.
Customer demand for broadband connectivity, especially in
aviation and maritime remains strong. There are also opportunities
to augment and extend the military Ka-band communications
capabilities of government customers (for example through our GX
network) and, in the medium term, as some government customers
replace their proprietary space-based communications capabilities,
there is the potential for commercial satcom capabilities to become
more embedded within government networks.
We also expect to see growing market opportunities In L-band
services, particularly in highly mobile connectivity, blue force
tracking, IoT and mobile connectivity to smaller platforms, but
also as new market segments beyond traditional defence and security
continuing to open up.
Q3 2018 results
Third Quarter ended 30 Nine months ended 30 September
September
2018 2017 Change 2018 2017 (restated) Change
($ in millions) (restated)
------------------------ ------ ----------- ------ ------- ------------------ ------
Revenue 95.2 88.4 7.7% 278.3 275.9 0.9%
Direct costs (14.9) (12.4) 20.2% (47.5) (39.6) 19.9%
------------------------ ----------- ------------------
Gross Margin 80.3 76.0 5.7% 230.8 236.3 (2.3%)
Indirect costs (10.4) (11.4) 8.8% (31.7) (33.9) 6.5%
------------------------ ------ ----------- ------ ------- ------------------ ------
EBITDA 69.9 64.6 8.2% 199.1 202.4 (1.6%)
EBITDA margin % 73.4% 73.1% - 71.5% 73.4% -
Cash capex (0.4) (2.5) 84.0% (2.1) (7.4) 71.6%
------------------------ ------ ----------- ------ ------- ------------------ ------
Business Unit Operating
Cash Flow 69.5 62.1 11.9% 197.0 195.0 1.0%
------------------------ ------ ----------- ------ ------- ------------------ ------
Government revenue increased by $6.8m, 7.7%, to $95.2m in Q3, as
a result of strong performances from our US and non-US Government
businesses across both our L-band and Ka-band networks.
Our US Government business continued to perform well, with
revenue growth of 1.5% in Q3. This was supported by the renewal of
a contract on revised terms earlier this year, with satisfactory
progress in the Boeing Take-or-Pay contract, which delivered a
further increase in underlying revenues, while the total contract
continues to reduce to normalised levels.
In addition, our US Government business was successful in
winning another important new customer contract in the period, to
contribute from 2019, highlighting further progress against our
strategic objective of increasing our long term contracted revenue
base in Government.
Outside the US, revenues increased by 21.1% in the period,
driven by increased product usage across key customers,
particularly in L-band.
Direct costs increased by $2.5m, mainly due to the impact of an
increased contribution from the lower margin CSSC contract.
Indirect costs declined by $1.0m in the period, due to lower
employee costs across the business. Mainly as a result of higher
revenue, EBITDA increased by $5.3m and EBITDA margin increased to
73.4%.
Aviation
Market overview
In Aviation we focus on three market segments - In-Flight
Connectivity ("IFC"), Business and General Aviation ("BGA") and
Safety and Operational Services ("SOS").
In-Flight Connectivity ("IFC") is expected to transform
commercial aviation in the medium term, with related ancillary
revenues becoming an increasingly important driver of airline
profitability. Consequently, while IFC remains in a highly
competitive market capture phase, it is expected to become the
largest global aviation segment for mobile satellite communications
in the future.
The Business and General Aviation ("BGA") market (i.e. business
jets) is also expected to grow, driven by a steady increase in
aircraft in service and increasing bandwidth requirement per
aircraft, driven by innovation in both cabin and cockpit
applications.
The Safety and Operational Services ("SOS") market (i.e. cockpit
connectivity for commercial aircraft) is also expected to continue
growing strongly, with many more aircraft expected to enter service
over the next five years and the arrival of a new generation of
services to the cockpit, including connected aircraft applications
and augmentation to regional Air Traffic Management systems.
Q3 2018 results
Third Quarter ended 30 September Nine months ended 30
September
($ in millions) 2018 2017 (restated) Change 2018 2017 (restated) Change
---------------- --------------- --------------- --------------- ----------- --------------- -------------
Revenue 68.2 50.9 34.0% 183.7 134.1 37.0%
Direct costs (16.1) (6.0) (168.3%) (37.9) (7.5) (405.3%)
---------------- --------------- ---------------
Gross Margin 52.1 44.9 16.0% 145.8 126.6 15.2%
Indirect costs (15.6) (19.4) 19.6% (49.4) (50.7) 2.6%
---------------- --------------- --------------- --------------- ----------- --------------- -------------
EBITDA 36.5 25.5 43.1% 96.4 75.9 27.0%
EBITDA margin % 53.5% 50.1% - 52.5% 56.6% -
Cash capex (10.7) (30.4) 64.8% (39.6) (115.8) 65.8%
---------------- --------------- --------------- --------------- ----------- --------------- -------------
Business Unit
Operating
Cash Flow 25.8 (4.9) 626.5% 56.8 (39.9) 242.4%
---------------- --------------- --------------- --------------- ----------- --------------- -------------
Aviation delivered outstanding revenue growth of $17.3m, or
34.0%, to $68.2m in Q3 2018, with further progress in both our
Core business and in rolling out IFC services in Commercial
Aviation.
EBITDA increased by $11.0m, 43.1%, to $36.5m, with EBITDA margin
up to 53.5% in the quarter (Q3 2017: 50.1%), driven by revenue
growth across the business and lower marketing expenditure in
IFC.
Cash flow from Aviation has also continued to improve with the
impact of higher EBITDA and lower capex together driving improvements
of $30.7m in the quarter and $96.7m year to date.
Aviation EBITDA and cash flow margins have been impacted as
we build a strong market position in the rapidly growing and
high potential IFC market. Overall, EBITDA margins in Aviation
consequently fell from over 60% in 2016 to 53% in 2017. We expect
that these margins will fall to no less than 45% in 2018, (an
increase from our previous guidance of around 40% in 2018),
before returning to at least 2016 margin levels, as a result
of higher revenues, improved revenue mix and more stable indirect
costs.
----------------------------------------------------------------------------------------------------------------
Core / IFC - Third Quarter ended Core IFC
30 September
--------------------------------- --------------------------------------------- ------------------------------
Q3 2018 Q3 2017 Q3 2018 Q3 2017
($ in millions) (restated) (restated)
--------------------------------- -------------------------------- ----------- --------------- -------------
Revenue 42.0 32.3 26.2 18.6
Direct costs (0.3) (0.2) (15.8) (5.8)
--------------------------------- -------------------------------- ----------- --------------- -------------
Gross Margin 41.7 32.1 10.4 12.8
Indirect costs (2.3) (2.9) (13.3) (16.5)
--------------------------------- -------------------------------- ----------- --------------- -------------
EBITDA 39.4 29.2 (2.9) (3.7)
--------------------------------- -------------------------------- ----------- --------------- -------------
EBITDA margin % 93.8% 90.4% n/a n/a
--------------------------------- -------------------------------- ----------- --------------- -------------
Cash capex - - (10.7) (30.4)
--------------------------------- -------------------------------- ----------- --------------- -------------
Business Unit Operating Cash Flow 39.4 29.2 (13.6) (34.1)
--------------------------------- -------------------------------- ----------- --------------- -------------
Core / IFC - Nine months ended 30
September Core IFC
--------------------------------- --------------------------------------------- ------------------------------
YTD 2018 YTD 2017 YTD 2018 YTD 2017
(restated)
($ in millions) (restated)
--------------------------------- -------------------------------- ----------- --------------- -------------
Revenue 116.3 95.8 67.4 38.3
Direct costs (1.0) (0.6) (36.9) (6.9)
--------------------------------- -------------------------------- ----------- --------------- -------------
Gross Margin 115.3 95.2 30.5 31.4
Indirect costs (7.4) (7.6) (42.0) (43.1)
--------------------------------- -------------------------------- ----------- --------------- -------------
EBITDA 107.9 87.6 (11.5) (11.7)
--------------------------------- -------------------------------- ----------- --------------- -------------
EBITDA margin % 92.8% 91.4% n/a n/a
--------------------------------- -------------------------------- ----------- --------------- -------------
Cash capex - - (39.6) (115.8)
--------------------------------- -------------------------------- ----------- --------------- -------------
Business Unit Operating Cash Flow 107.9 87.6 (51.1) (127.5)
--------------------------------- -------------------------------- ----------- --------------- -------------
Core Aviation business
Our Core Aviation business comprises SwiftBroadband and
JetConneX for BGA, Classic Aero and SwiftBroadband-Safety for SOS
and legacy products. Revenue growth across these businesses
remained strong, increasing by $9.7m, 30.0%, to $42.0m in Q3
2018.
By the end of Q3 2018, 362 aircraft were installed with
JetConneX, our GX-based product for BGA, (from 109 at the end of Q3
2017). In the year to date, JetConneX grew airtime revenue by a
factor of four times to $6.1m in the quarter.
SwiftBroadband revenues grew $1.6m, 9.4%, in the quarter to
$18.5m, driven by higher usage, with the number of installed
aircraft remaining stable at around 4,000.
In SOS, Classic Aero delivered revenue growth of $1.9m, 16.9%,
to $13.1m in the quarter, mainly reflecting higher usage. The
number of aircraft using Classic Aero remained stable at around
9,000.
Revenue in our legacy products increased to $4.0m (Q3 2017:
$2.2m), driven by a one-off deferred revenue release of $2.7m in
the quarter.
Direct costs in our Core business remained fairly immaterial at
$0.3m in Q3 2018, whilst indirect costs reduced slightly to $2.3m.
EBITDA and Business Unit Operating Cash Flow for the Core Aviation
business consequently both grew by $10.2m to $39.4m in the
quarter.
IFC
IFC revenues, comprising our GX Aviation services for IFC and
our L-band-based IFC services for commercial aviation, together
grew by $7.6m, 40.9%, to $26.2m in Q3 2018, including $3.3m of high
margin GX airtime revenue.
We have over 1,400 aircraft expected under signed contracts for
our GX and EAN Aviation IFC services and we continue to advance our
new business pipeline of around 3,000 aircraft.
Several customers have selected GX Aviation for their IFC
service offering, but have not yet signed contracts with Inmarsat
or our channel partner. These include Garuda Indonesia, announced
last week, SpiceJet in India, as well as other major carriers in
Asia, Europe and the Middle East. A number of our existing
customers are expected to expand their aircraft and fleet mandates
with Inmarsat.
We have 321 aircraft installed with Inmarsat equipment across
several customers (from 286 at the end of Q2), including the first
installed aircraft on the European Aviation Network. We expect the
rate of installation to increase over the coming quarters.
On 20 September 2018, Inmarsat and Panasonic Avionics
Corporation ("Panasonic") entered into a landmark strategic
collaboration agreement for Commercial Aviation. This agreement
accelerates our drive to establish a sustainable global leadership
position in IFC, by combining Inmarsat's position as the leading
global mobile satellite provider and Panasonic's market-leading
position in IFC and in-flight entertainment ("IFE"). As part of the
agreement, Inmarsat will become Panasonic's exclusive long term
provider of Ka-band IFC capacity, through GX and will have access
to Panasonic's downstream IFE presence and capability, enhancing
our IFC service proposition through provision of Panasonic's
airline services to our direct customers.
IFC direct costs increased to $15.8m in Q3 2018 (Q3 2017:
$5.8m), due to additional short term GX equipment sales being added
to the revenue mix and some contractual start-up costs.
Indirect costs in IFC in Q3 were $3.2m lower than last year at
$13.3m, reflecting lower marketing expenditure.
Cash capex in IFC decreased to $10.7m in Q3 2018, (Q3 2017:
$30.4m), mainly as a result of lower investment in GX equipment for
customers.
As a result of all of the factors outlined above, IFC EBITDA
improved marginally in the period. IFC Operating Cash Flow improved
significantly, however, reducing the level of start-up investment
by $20.5m to $13.6m for the quarter.
Enterprise
Market overview
In Enterprise, there is limited future growth potential for our
legacy markets and products, due to increasing terrestrial network
deployments in remote and rural areas. Consequently, legacy
products, such as Broadband Global Area Network ("BGAN") and
satellite phones will continue to decline gradually, but with a
re-orientation towards back-up, emergency and event-driven
usage.
Over the longer term, significant growth is expected from the
emerging Industrial Internet of Things markets, either principally
served by satellite or served by terrestrial technologies augmented
by satellite services. Several of these markets are now in proof of
concept or early trial stage as the value that real time data
brings becomes more apparent.
Q3 2018 results
Third Quarter ended 30 Nine months ended 30
September September
2018 2017 Change 2018 2017 Change
($ in millions) (restated) (restated)
------------------------ ----- ----------- ------- ------ ----------- -------
Revenue 34.6 38.2 (9.4%) 98.6 100.5 (1.9%)
Direct costs (7.3) (7.4) 1.4% (19.5) (17.1) (14.0%)
------------------------ ----------- -----------
Gross Margin 27.3 30.8 (11.4%) 79.1 83.4 (5.2%)
Indirect costs (5.4) (4.2) (28.6%) (16.5) (13.2) (25.0%)
------------------------ ----- ----------- ------- ------ ----------- -------
EBITDA 21.9 26.6 (17.7%) 62.6 70.2 (10.8%)
EBITDA margin % 63.3% 69.6% - 63.5% 69.9% -
Cash capex - (0.1) - - (0.2) -
------------------------ ----- ----------- ------- ------ ----------- -------
Business Unit Operating
Cash Flow 21.9 26.5 (17.4%) 62.6 70.0 (10.6%)
------------------------ ----- ----------- ------- ------ ----------- -------
Enterprise revenues declined by $3.6m, 9.4%, in Q3 2018, mainly
reflecting a tough prior year comparator (which included higher
revenues relating to the hurricane season) and lower
fixed-to-mobile revenues.
This was highlighted in Q3 2018 by revenues from BGAN which fell
by $1.1m, 12.9%, to $7.4m and by satellite phone airtime and
handset revenue which declined by $0.8m, 7.1%, to $10.4m.
Fixed-to-mobile revenues declined by $1.7m, 40.4% to $2.5m,
reflecting continued migration to Voice-over-IP.
Machine to Machine ("M2M") revenue increased by $0.9m, 19.6%, to
$5.5m driven by on-going demand for M2M in commercial applications.
Furthermore, in line with our strategy to establish new foundations
for future growth around "Internet of Things" opportunities, we
made good progress in establishing a number of proof-of-concept
initiatives in this area during the period.
Direct costs fell marginally to $7.3m while indirect costs
increased by $1.2m in Q3 2018, as a result of legal fees in the
period. EBITDA was consequently $4.7m lower in Q3 2018, with EBITDA
margin declining to 63.3%.
Central Services
Third Quarter ended 30 Nine months ended 30
September September
($ in millions) 2018 2017 (restated) Change 2018 2017 (restated) Change
------------------------ ------- --------------- -------- ------- --------------- -------
Revenue
Ligado Networks 32.9 32.4 1.5% 97.7 96.1 1.7%
Other 3.4 3.2 6.3% 11.1 10.4 6.7%
------------------------ ------- --------------- -------- ------- --------------- -------
Total Revenue 36.3 35.6 2.0% 108.8 106.5 2.2%
Direct costs (5.3) (1.7) (211.8%) (13.3) (9.2) (44.6%)
------------------------ ------- --------------- -------- ------- --------------- -------
Gross Margin 31.0 33.9 (8.6%) 95.5 97.3 (1.8%)
Indirect costs (61.5) (71.6) 14.1% (200.7) (209.8) 4.3%
------------------------ ------- --------------- -------- ------- --------------- -------
EBITDA (30.5) (37.7) 19.1% (105.2) (112.5) 6.5%
Cash capex (133.4) (58.1) (129.6%) (336.6) (250.8) (34.2%)
------------------------ ------- --------------- -------- ------- --------------- -------
Business Unit Operating
Cash Flow (163.9) (95.8) (70.9%) (441.8) (363.3) (21.6%)
------------------------ ------- --------------- -------- ------- --------------- -------
Revenue and EBITDA from Ligado was little changed at $32.9m in
Q3 2018.
Direct costs increased by $3.6m, mainly due to higher inventory
provisions.
Indirect costs decreased by $10.1m reflecting timing issues and
reduced expenditure in a number of areas, as well as the impact of
the implementation of IFRS16 which moved lease costs of $2.9m into
depreciation. For 2018 as a whole, we continue to expect low single
digit percentage growth in central services costs.
Central Services capital expenditure increased by $75.3m to
$133.4m, due to the timing of expenditure, on our major
infrastructure programmes, including the 5(th) GX satellite and the
I-6 satellite infrastructure.
Reconciliation of EBITDA to profit after tax
Third Quarter ended Nine months ended 30 September
30 September
($ in millions) 2018 2017 (restated) Change 2018 2017 (restated) Change
------------------------------ ------- --------------- -------- -------- ---------------- -------
EBITDA 206.5 193.3 6.8% 579.5 573.0 1.1%
Depreciation and amortisation (115.0) (103.4) (11.2%) (347.5) (297.5) (16.8%)
Asset impairments
& Other (6.6) (3.0) (120.0%) (6.4) (3.4) (88.2%)
------------------------------ ------- --------------- -------- -------- ---------------- -------
Operating profit 84.9 86.9 (2.3%) 225.6 272.1 (17.1%)
Net financing income/(costs) 154.5 36.6 322.1% (105.3) (85.2) (23.6%)
Taxation charge (11.7) (10.8) (8.3%) (24.4) (35.4) 31.1%
------------------------------ ------- --------------- -------- -------- ---------------- -------
Profit after tax 227.7 112.7 102.0% 95.9 151.5 (36.7%)
------------------------------ ------- --------------- -------- -------- ---------------- -------
Addback of change
in fair value of derivative
(2023 convertible
bond) (181.2) (56.4) (221.3%) 26.1 15.8 65.2%
------------------------------ ------- --------------- -------- -------- ---------------- -------
Adjusted profit after
tax 46.5 56.3 (17.4%) 122.0 167.3 (27.1%)
------------------------------ ------- --------------- -------- -------- ---------------- -------
Operating profit
Operating profit for the quarter ended 30 September 2018
decreased by $2.0m to $84.9m. This was driven by this increase in
EBITDA of $13.2m discussed above, which was offset by additional
depreciation of $11.6m attributable mainly to the GX4 (I-5 F4) and
S-Band satellites coming into commercial service in Q4 2017.
Net financing income/(cost)
Net financing income for the quarter increased by $117.9m to
$154.5m, driven by a decrease of $181.2m in the unrealised
conversion liability on the 2023 Convertible Bond.
The fair value of the conversion liability is calculated as the
difference between the market value of the Convertible Bond and the
'book value' of the cash element of the convertible bond. The
convertible price decreased during Q3, following the withdrawal of
EchoStar's proposed takeover approach at the end of Q2, driving a
decrease in the fair value liability and corresponding benefit in
the income statement. The impact of the unrealised conversion
liability will reverse to nil if the convertible bonds reach
maturity and are not converted.
Net financing costs, excluding the non-cash impact of the
convertible bond adjustments outlined above, increased by $6.9m to
$26.7m for the quarter due to an increase in net debt and a
reduction in capitalised interest.
Taxation
The tax charge has increased marginally by $0.9m in the third
quarter to $11.7m. The effective tax rate reported for the quarter
was 4.9% (2017 restated: 8.8%), reflecting removal of the
unrealised gain on the conversion liability of the convertible
bonds which is non-taxable. The underlying effective tax rate was
23.0% (2017 restated: 16.8%). This rate is higher than the UK
statutory rate of 19% (2017: 19.25%) due to impairments which have
been treated as non-deductible in the period and some profits being
earned in jurisdictions where the tax rate is higher than the
UK.
The Group maintains tax provisions in respect of ongoing
enquiries with tax authorities. In the event that all such
enquiries were settled entirely in favour of the authorities, the
Group would incur a cash tax outflow of c. $110m during the first
half of 2019. The quantum and timing of this cost remains uncertain
but it is substantially provided for and the enquiries remain
ongoing at this time.
Profit after tax ("PAT")
Statutory PAT increased by $115.0m in the quarter, driven
additionally by a reduction in the unrealised conversion liability
on the 2023 Convertible Bond discussed above.
Adjusted PAT, which excludes the impact of the unrealised
conversion liability, decreased by $9.8m in the quarter, reflecting
the changes in EBITDA, depreciation, financing costs and taxation
noted above.
Cash Flow(1)
Third Quarter ended 30 September Nine months ended 30 September
($ in millions) 2018 2017 (restated) 2018 2017 (restated)
-------------------------------------- ------------ ------------------------ ------------ ------------------------
EBITDA 206.5 193.3 579.5 573.0
Non-cash items 4.9 7.8 4.9 19.4
Change in working capital (1.7) (13.5) (63.3) (3.0)
-------------------------------------- ------------ ------------------------ ------------ ------------------------
Cash generated from operations 209.7 187.6 521.1 589.4
Cash Capital expenditure (157.5) (101.0) (415.3) (409.2)
Net interest paid (17.9) (22.7) (77.6) (77.5)
Tax received/(paid) 2.5 (1.5) 3.9 (18.1)
-------------------------------------- ------------ ------------------------ ------------ ------------------------
Free cash flow 36.8 62.4 32.1 84.6
Dividends paid to shareholders (1.1) (0.1) (40.0) (118.0)
Other movement including foreign
exchange - (4.1) 1.4 (7.7)
------------ ------------------------ ------------ ------------------------
Net cash flow 35.7 58.2 (6.5) (41.1)
Increase/(decrease) to cash
reclassified from short-term deposits 120.6 132.7 291.1 112.7
Repayment of borrowings (67.5) (40.4) (136.1) (82.0)
-------------------------------------- ------------ ------------------------ ------------ ------------------------
Net increase/ (decrease) in cash and
cash equivalents 88.8 150.5 148.5 (10.4)
-------------------------------------- ------------ ------------------------ ------------ ------------------------
(1) Cash flow outlined in this table is non-statutory.
Cash and net borrowings
Third Quarter ended 30 September Nine months ended 30 September
($ in millions) 2018 2017 (restated) 2018 2017 (restated)
------------------------------ ----------------------------- --------------- ---------- --------------------
At beginning of the period 204.3 100.6 144.6 261.5
Net increase/(decrease) in
cash and cash equivalents 88.8 150.5 148.5 (10.4)
------------------------------ ----------------------------- --------------- ---------- --------------------
Sub-total (net of bank
overdrafts) 293.1 251.1 293.1 251.1
------------------------------ ----------------------------- --------------- ---------- --------------------
Short term deposits
At beginning of the period 171.5 415.0 342.0 395.0
Net (decrease)/increase in
short term deposits (120.6) (132.7) (291.1) (112.7)
------------------------------ ----------------------------- --------------- ---------- --------------------
Sub-total 50.9 282.3 50.9 282.3
------------------------------ ----------------------------- --------------- ---------- --------------------
Total cash, cash equivalents
and short term deposits 344.0 533.4 344.0 533.4
------------------------------ ----------------------------- --------------- ---------- --------------------
Opening net borrowings(1) 2,139.5 2,005.7 2,078.6 1,894.8
Net cash flow (35.7) (58.2) 6.5 41.1
Non-cash movements(2) 11.9 4.5 30.6 16.1
-------------------------- ------- ------- ------- -------
Closing net borrowings(1) 2,115.7 1,952.0 2,115.7 1,952.0
-------------------------- ------- ------- ------- -------
Free cash flow decreased by $25.6m for the quarter ended 30
September 2018 mainly reflecting the increase in EBITDA, improved
working capital requirements and lower interest paid and taxation,
but also higher capital expenditure of $56.5m.
The reduction of $11.8m in the working capital outflow was
mainly due to a decrease in receivables, with customer collections
starting to improve, having slowed in previous quarters after the
introduction of a new billing system earlier this year.
Capital Expenditure
Third Quarter ended 30 September Nine months ended 30 September
($ in millions) 2018 2017 (restated) 2018 2017 (restated)
--------------------------------- --------- ------------------------ -------- -----------------------
Major infrastructure projects(3) 88.1 40.7 225.8 244.2
Success-based capex(4) 16.2 32.2 61.3 93.0
Other capex(5) 20.8 36.3 68.3 95.1
Cash flow timing(6) 32.4 (8.2) 59.9 (23.1)
--------------------------------- --------- ------------------------ -------- -----------------------
Total cash capital expenditure 157.5 101.0 415.3 409.2
--------------------------------- --------- ------------------------ -------- -----------------------
The increase in capital expenditure on major infrastructure
projects relates to the timing of investment in the I-6 satellite
infrastructures, while the decrease in success-based capex is due
to the timing of GX installations in Aviation. Other capex
decreased mainly due to the timing of investment in IT and Cyber
compared to the prior year. Cash flow timing was impacted by
contractual payments on GX5.
In line with our guidance that capital expenditure is expected
to meaningfully moderate after 2020, we continue to develop the
next generation of GX satellites, to augment the global coverage we
have in place today, using new, lower cost satellite technologies.
Discussions continue with a number of potential manufacturing
partners about delivering this technology, and we expect to be able
to provide more specific guidance about our plans in this regard in
the coming quarters.
(1) Net borrowings includes the convertible bond, total
borrowings less cash and cash equivalents and short-term
investments. Borrowings exclude accrued interest and any derivative
liabilities.
(2) Non-cash movements relate primarily to the amortisation of
deferred financing costs and the fair value of the convertible
bond.
(3) "Major infrastructure projects" capex consists of satellite
design, build and launch costs and ground network infrastructure
costs.
(4) "Success-based capex" consists of capital equipment
installed on ships, aircraft and other customer platforms.
(5) "Other capex" investment primarily includes infrastructure
maintenance, IT and capitalised product and service development
costs.
(6) Cash flow timing represents the difference between accrued
capex and the actual cash flows
Group Liquidity and Capital Resources
At 30 September 2018, the Group had over $1 billion in available
liquidity, including cash and cash equivalents of $293.1m, short
term deposits of $50.9m and available but undrawn committed
borrowing facilities of $750m under a Senior Revolving Credit
Facility.
Principal Risks and Uncertainties
There have been no material changes in the principal risks and
uncertainties from those described on pages 51 - 55 of the 2017
Inmarsat plc Annual Report and Accounts.
Related Party Transactions
There have been no material changes in the related party
transactions described on page 151 of the 2017 Inmarsat plc Annual
Report and Accounts.
Inmarsat plc
99 City Road
London EC1Y 1AX
By order of the Board,
Rupert Pearce Tony Bates
Chief Executive Officer Chief Financial Officer
7 November 2018 7 November 2018
INMARSAT PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
For the nine months ended 30 September 2018 (unaudited)
Third Quarter ended Nine months ended
30 September 30 September
($ in millions) 2018 2017 (restated) (1) 2018 2017 (restated) (1)
------------------------------------------------------- ------- ------------------- ------- ----------------------
Revenues 369.3 356.2 1,086.5 1,039.9
Employee benefit costs (73.9) (78.2) (225.8) (218.9)
Network and satellite operations costs (45.3) (46.2) (140.1) (142.9)
Other operating costs (52.6) (51.8) (170.0) (142.3)
Own work capitalised 9.0 13.3 28.9 37.2
------------------------------------------------------- ------- ------------------- ------- ----------------------
Total net operating costs (162.8) (162.9) (507.0) (466.9)
------- ------------------- ------- ----------------------
EBITDA 206.5 193.3 579.5 573.0
Depreciation and amortisation (115.0) (103.4) (347.5) (297.5)
Impairment loss (7.0) - (7.0) -
Loss on disposals of assets (0.6) (3.7) (2.2) (5.5)
Share of profit of associates 1.0 0.7 2.8 2.1
------------------------------------------------------- ------- ------------------- ------- ----------------------
Operating profit 84.9 86.9 225.6 272.1
Financing income 2.0 1.8 6.3 6.1
Financing costs (28.7) (21.6) (85.5) (75.5)
Change in fair value of derivative2 181.2 56.4 (26.1) (15.8)
------------------------------------------------------- ------- ------------------- ------- ----------------------
Net financing costs 154.5 36.6 (105.3) (85.2)
------------------------------------------------------- ------- ------------------- ------- ----------------------
Profit before tax 239.4 123.5 120.3 186.9
------------------------------------------------------- ------- ------------------- ------- ----------------------
Taxation charge (11.7) (10.8) (24.4) (35.4)
------- ------------------- ------- ----------------------
Profit for the period 227.7 112.7 95.9 151.5
------- ------------------- ------- ----------------------
Attributable to:
Equity holders 227.5 112.7 95.4 151.2
Non-controlling interest(3) 0.2 - 0.5 0.3
------------------------------------------------------- ------- ------------------- ------- ----------------------
Earnings per share for profit attributable to the
equity holders of the Company during the
period (expressed in $ per share)
------------------------------------------------------- ------- ------------------- ------- ----------------------
- Basic 0.50 0.25 0.21 0.33
------------------------------------------------------- ------- ------------------- ------- ----------------------
- Diluted 0.49 0.25 0.21 0.33
------------------------------------------------------- ------- ------------------- ------- ----------------------
Adjusted earnings per share for profit attributable to
the equity holders of the Company during
the period
(expressed in $ per share)
------------------------------------------------------- ------- ------------------- ------- ----------------------
- Basic 0.10 0.12 0.27 0.37
------------------------------------------------------- ------- ------------------- ------- ----------------------
- Diluted 0.10 0.12 0.26 0.37
------------------------------------------------------- ------- ------------------- ------- ----------------------
(1) 2017 figures have been restated throughout this announcement
to reflect the adoption of IFRS15 and the reclassification of short
term deposits. The Group has also adopted IFRS16 and IFRS9 as of 1
January 2018. Please refer to Appendix 2 of this announcement for
further details.
(2) The change in fair value of derivatives relates to the
mark-to-market valuation of the conversion liability component of
the convertible bonds due 2023, issued in Q3 2016.
(3) Non-controlling interest ("NCI") refers to the Group's 51%
shareholding in Inmarsat Solutions ehf
INMARSAT PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the nine months ended 30 September 2018 (unaudited)
Third Quarter ended Nine months ended
30 September 30 September
($ in millions) 2018 2017 (restated) 2018 2017 (restated)
---------------------------------------------------------------------- ----- --------------- ----- ---------------
Profit for the period 227.7 112.7 95.9 151.5
---------------------------------------------------------------------- ----- --------------- ----- ---------------
Other comprehensive income
Items that may be reclassified subsequently to the Income Statement:
Foreign exchange translation differences (0.1) (0.1) (0.1) 0.3
Net gain/(loss) on cash flow hedges 2.1 5.8 2.9 14.0
Items that will not be reclassified subsequently to the Income
Statement:
Remeasurement of the defined benefit asset - - 16.0 1.5
Tax credited directly to equity - (0.1) (3.6) (0.5)
Other comprehensive income for the period, net of tax 2.0 5.6 15.2 15.3
---------------
Total comprehensive loss for the period, net of tax 229.7 118.3 111.1 166.8
---------------------------------------------------------------------- ----- --------------- ----- ---------------
Attributable to:
Equity holders 229.5 118.3 110.6 166.5
Non-controlling interest 0.2 - 0.5 0.3
---------------------------------------------------------------------- ----- --------------- ----- ---------------
INMARSAT PLC
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (unaudited)
30 September 31 December 30 September
2018 2017 2017
(unaudited) (restated) (restated
($ in millions) & unaudited)
------------------------------------ ------------ ----------- --------------
Assets
Non-current assets
Property, plant and equipment 3,307.1 3,255.5 3,165.7
Intangible assets 776.8 788.9 776.5
Investments 17.9 16.2 15.2
Right of Use Assets 64.9 - -
Other receivables 35.3 23.9 16.8
Deferred tax asset 27.3 35.4 42.3
Derivative financial instruments - 0.3 -
------------------------------------ ------------ ----------- --------------
4,229.3 4,120.2 4,016.5
------------------------------------ ------------ ----------- --------------
Current assets
Cash and cash equivalents 293.8 144.9 251.6
Short-term deposits 50.9 342.0 282.3
Trade and other receivables 340.5 344.4 328.4
Inventories 50.5 33.9 30.4
Current tax assets 8.4 13.8 12.9
Derivative financial instruments 0.3 1.2 2.7
Restricted cash 3.1 2.8 2.9
------------------------------------ ------------ ----------- --------------
747.5 883.0 911.2
------------------------------------ ------------ ----------- --------------
Total assets 4,976.8 5,003.2 4,927.7
------------------------------------ ------------ ----------- --------------
Liabilities
Current liabilities
Borrowings 124.6 125.6 103.7
Trade and other payables 538.8 634.4 588.1
Provisions 6.2 16.2 1.7
Current tax liabilities 141.1 130.2 136.0
Derivative financial instruments 3.8 7.9 10.0
Lease obligations 12.5 - -
------------------------------------ ------------ ----------- --------------
827.0 914.3 839.5
------------------------------------ ------------ ----------- --------------
Non-current liabilities
Borrowings 2,335.8 2,439.9 2,382.2
Other payables 18.4 25.0 27.6
Provisions 9.1 9.7 14.0
Deferred tax liabilities 240.6 238.4 223.7
Derivative financial instruments 153.1 127.8 152.1
Lease obligations 61.2 - -
------------------------------------ ------------ ----------- --------------
2,818.2 2,840.8 2,799.6
------------------------------------ ------------ ----------- --------------
Total liabilities 3,645.2 3,755.1 3,639.1
------------------------------------ ------------ ----------- --------------
Net assets 1,331.6 1,248.1 1,288.6
------------------------------------ ------------ ----------- --------------
Shareholders' equity
Ordinary shares 0.3 0.3 0.3
Share premium 761.0 745.4 731.7
Other reserves 104.9 92.0 88.2
Retained earnings 464.9 409.8 468.1
------------------------------------ ------------ ----------- --------------
Equity attributable to shareholders 1,331.1 1,247.5 1,288.3
Non-controlling interest 0.5 0.6 0.3
------------------------------------ ------------ ----------- --------------
Total equity 1,331.6 1,248.1 1,288.6
------------------------------------ ------------ ----------- --------------
INMARSAT PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the nine months ended 30 September 2018 (unaudited)
Share Share Share Cash Other(1) Retained NCI(2) Total
capital premium option flow earnings
reserve hedge (restated)
($ in millions) reserve
------------------------ -------- -------- -------- -------- -------- ----------- ------ -------
Balance at 1 January
2017 (audited) 0.3 700.4 87.9 (23.3) (2.8) 467.5 0.6 1,230.6
------------------------ -------- -------- -------- -------- -------- ----------- ------ -------
Share-based payments(3) - - 12.1 - - (0.4) - 11.7
Dividend declared - - - - - (151.2) (0.6) (151.8)
Scrip dividend
cash reinvestment(5) - - - - - 31.2 - 31.2
Scrip dividend
share issue(5) - 31.2 - - - (31.2) - -
Comprehensive Income:
Profit for the
year - - - - - 151.2 0.3 151.5
OCI(4) - before
tax - 0.1 - 14.0 0.3 1.5 - 15.9
OCI(4) - tax - - - - - (0.5) - (0.5)
------------------------ -------- -------- -------- -------- -------- ----------- ------ -------
Balance at 30 September
2017 (unaudited) 0.3 731.7 100.0 (9.3) (2.5) 468.1 0.3 1,288.6
------------------------ -------- -------- -------- -------- -------- ----------- ------ -------
Balance at 1 January
2018 (audited) 0.3 745.4 97.1 (7.8) 2.7 409.8 0.6 1,248.1
------------------------ -------- -------- -------- -------- -------- ----------- ------ -------
Share-based payments(3) - - 10.1 - - 2.3 - 12.4
Dividend declared - - - - - (55.0) (0.6) (55.6)
Scrip dividend
cash reinvestment(5) - - - - - 15.6 - 15.6
Scrip dividend
share issue(5) - 15.6 - - - (15.6) - -
Comprehensive Income:
Profit for the
year - - - - - 95.4 0.5 95.9
OCI(4) - before
tax - - - 2.9 (0.1) 16.0 - 18.8
OCI(4) - tax - - - - - (3.6) - (3.6)
-------- -------- -------- -------- -------- ----------- ------ -------
Balance at 30 September
2018 (unaudited) 0.3 761.0 107.2 (4.9) 2.6 464.9 0.5 1,331.6
------------------------ -------- -------- -------- -------- -------- ----------- ------ -------
1 The 'other' reserve relates to ordinary shares held by the
Employee Share Trust debit of $3.1m (2017: $2.4m), the currency
reserve credit of $1.1m (2017: $0.6m) and the revaluation reserve
of $0.6m (2017: $0.6m).
2 Non-controlling interest ("NCI") refers to the Group's 51%
shareholding in Inmarsat Solutions ehf.
3 Represents the fair value of share option awards recognised in
the period.
4 OCI refers to Other Comprehensive Income.
5 Represents the cash value of the scrip dividend reinvested
into the Company
INMARSAT PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the nine months ended 30 September 2018 (unaudited)
Third Quarter ended Nine months ended
30 September 30 September
2018 2017 2018 2017
($ in millions) (restated) (restated)
---------------------------------- ---------- --------------- -------- -----------
Cash flow from operating
activities
Cash generated from operations 209.7 187.7 521.1 589.4
Interest received 1.8 3.0 4.5 4.5
Tax received/(paid) 2.5 (1.5) 3.9 (18.1)
---------------------------------- --------------- -----------
Net cash inflow from operating
activities 214.0 189.2 529.5 575.8
---------------------------------- ---------- --------------- -------- -----------
Cash flow from investing
activities
Purchase of property, plant
and equipment (136.0) (83.2) (323.8) (358.8)
Additions to intangible
assets (12.7) (4.6) (62.7) (13.2)
Own work capitalised (8.8) (13.2) (28.8) (37.2)
Short-term cash deposits
>3 months 120.6 132.7 291.1 112.7
Investment in financial
asset - - - (1.1)
Net cash (used)/generated
in investing activities (36.9) 31.7 (124.2) (297.6)
---------------------------------- ---------- --------------- -------- -----------
Cash flow from financing
activities
Dividends paid to shareholders (1.1) (0.1) (40.0) (118.0)
Repayment of borrowings (61.1) (40.4) (122.2) (80.8)
Interest paid (19.7) (25.7) (82.1) (82.0)
Arrangement costs of financing (3.8) - (4.4) (1.2)
Cash payments for the principal
portion of the lease obligations (2.6) - (9.5) -
Other financing activities 0.1 (0.7) (0.9) (1.6)
---------- --------
Net cash used in financing
activities (88.2) (66.9) (259.1) (283.6)
---------------------------------- ---------- --------------- -------- -----------
Foreign exchange adjustment (0.1) (3.5) 2.3 (5.0)
---------------------------------- ---------- --------------- -------- -----------
Net increase/(decrease)
in cash and cash equivalents 88.8 150.5 148.5 (10.4)
---------------------------------- ---------- --------------- -------- -----------
Cash and cash equivalents
At beginning of the period 204.3 100.6 144.6 261.5
Net increase/(decrease)
in cash and cash equivalents 88.8 150.5 148.5 (10.4)
---------------------------------- --------------- -----------
At end of the period (net
of bank overdrafts) 293.1 251.1 293.1 251.1
---------------------------------- ---------- --------------- -------- -----------
Comprising:
Cash at bank and in hand 165.7 56.4 165.7 56.4
Short-term deposits with
original maturity of less
than three months 128.1 195.2 128.1 195.2
---------------------------------- ---------- --------------- -------- -----------
Cash and cash equivalents 293.8 251.6 293.8 251.6
---------------------------------- ---------- --------------- -------- -----------
Bank overdrafts (0.7) (0.5) (0.7) (0.5)
---------------------------------- ---------- --------------- -------- -----------
Net cash and cash equivalents
at end of period 293.1 251.1 293.1 251.1
---------------------------------- ---------- --------------- -------- -----------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(unaudited)
1. General information
Inmarsat plc ('the Company' or, together with its subsidiaries,
'the Group') is a company incorporated in the United Kingdom and
registered in England.
2. Principal accounting policies
Basis of preparation
The condensed consolidated interim financial statements for the
quarter and nine months ended 30 September 2018 have been prepared
in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34, 'Interim Financial
Reporting' as adopted by the European Union. These are approved by
the Board of Directors on 7 November 2018.
The financial information presented in this release does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The statutory accounts for the year ended 31
December 2017 were approved by the Board of Directors on 9 March
2018. The auditor's report on those accounts was unqualified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under Section 498(2) or (3) of the Companies
Act 2006.
Going Concern
The Group has a robust and resilient business model, and is
expected to generate positive free cash flow over the medium term
and is compliant with all banking covenants. The Directors
therefore believe that the Company and the Group are well placed to
manage their business risks successfully. After considering current
financial projections and facilities available and after making
enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly,
Inmarsat plc continues to adopt the going concern basis in
preparing the consolidated financial statements.
Basis of accounting
The functional and reporting currency of the Company and most of
the Group's subsidiaries is the US Dollar, as the majority of
receipts from operational transactions and borrowings are
denominated in US Dollars.
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the balance sheet date and the reported amounts of revenue and
expenses during the period. Although these estimates are based on
management's best estimate of the amount, event or actions, the
actual results may ultimately differ from these estimates.
In the current period the Group has adopted IFRS15, IFRS16 and
IFRS9. Additionally a reclassification of short-term deposits has
been made to better reflect the requirements of IAS7. The impact of
these changes in accounting policies has been discussed in Appendix
2 of this announcement. Other than those discussed within Appendix
2, the accounting policies used are consistent with the 2017
financial statements.
3. Segment information
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker
to allocate resources and assess the performance of the Group. The
Group's operating segments are aligned to five market-facing
business units, being:
-- Maritime, focusing on worldwide commercial maritime services;
-- US Government, focusing on US civil and military government services; and
3. Segment information (continued)
-- Global Government, focusing on worldwide civil and military government services.
-- Aviation, focusing on commercial IFC, business and general aviation services;
-- Enterprise, focusing on worldwide energy, industry, media, carriers, and M2M services;
These five business units are supported by 'Central Services'
which include satellite operations and backbone infrastructure,
corporate administrative costs, and any income that is not directly
attributable to a business unit such as Ligado Networks. The Group
has aggregated the US Government and Global Government operating
segments into one reporting segment, as the segments meet the
criteria for aggregation under IFRS8. Therefore, the Group's
reportable segments are Maritime, Government, Aviation, Enterprise
and Central Services. The accounting policies of the operating
segments are the same as the Group's accounting policies described
in Note 2. Segment results are assessed by the Chief Operating
Decision Maker at the EBITDA level without the allocation of
central costs, depreciation, net financing costs and taxation.
Third Quarter Nine months ended
ended 30 September
30 September
($ in millions) 2018 2017 (restated) 2018 2017 (restated)
------------------------------- ------- --------------- --------- ---------------
Revenues
Maritime 135.0 143.1 417.1 422.9
Government 95.2 88.4 278.3 275.9
Aviation 68.2 50.9 183.7 134.1
Enterprise 34.6 38.2 98.6 100.5
Central Services(1) 36.3 35.6 108.8 106.5
------------------------------- ------- --------------- ---------
Total revenues 369.3 356.2 1,086.5 1,039.9
------------------------------- ------- ---------
EBITDA
Maritime 108.7 114.3 326.6 337.0
Government 69.9 64.6 199.1 202.4
Aviation 36.5 25.5 96.4 75.9
Enterprise 21.9 26.6 62.6 70.2
Central Services(1) (30.5) (37.7) (105.2) (112.5)
------------------------------- ------- --------------- ---------
Total EBITDA 206.5 193.3 579.5 573.0
Depreciation and amortisation (115.0) (103.4) (347.5) (297.5)
Other (6.6) (3.0) (6.4) (3.4)
------------------------------- ------- --------------- --------- ---------------
Operating profit 84.9 86.9 225.6 272.1
Net financing costs 154.5 36.6 (105.3) (85.2)
------------------------------- ------- --------------- --------- ---------------
Profit before tax 239.4 123.5 120.3 186.9
Taxation charge (11.7) (10.8) (24.4) (35.4)
------------------------------- ------- --------------- --------- ---------------
Profit for the period 227.7 112.7 95.9 151.5
--------------- ---------------
Cash capital expenditure
Maritime 13.0 11.7 37.0 35.0
Government 0.4 2.5 2.1 7.4
Aviation 10.7 30.4 39.6 115.8
Enterprise - 0.1 - 0.2
Central Services 133.4 56.3 336.6 250.8
------------------------------- ------- --------------- --------- ---------------
Total cash capital expenditure 157.5 101.0 415.3 409.2
------------------------------- ------- --------------- --------- ---------------
Financing costs capitalised in
the cost of qualifying assets 10.3 15.0 26.6 37.6
Cash flow timing (32.4) 8.2 (59.9) 23.1
------------------------------- ------- --------------- --------- ---------------
Total capital expenditure 135.4 124.2 382.0 469.9
------------------------------- ------- --------------- --------- ---------------
(1) Central Services includes revenue and EBITDA from
Ligado.
4. Net financing costs
Third Quarter Nine months ended
ended 30 September
30 September
($ in millions) 2018 2017 (restated) 2018 2017 (restated)
------------------------------------- ------- --------------- -------- ------------------
Bank interest receivable and other
interest (2.0) (1.8) (6.3) (6.1)
Total financing income (2.0) (1.8) (6.3) (6.1)
------------------------------------- ------- --------------- -------- ------------------
Interest on Senior Notes and credit
facilities 23.3 23.7 69.7 70.9
Interest on Convertible Bonds 9.6 9.4 28.7 28.0
Amortisation of debt issue costs 4.2 2.3 10.1 8.8
Amortisation of discount on Senior
Notes due 2022 0.3 0.3 0.8 0.8
Amortisation of discount on deferred
satellite liabilities - - 0.1 0.3
Net interest on the net pension
asset and post-employment liability 0.2 0.4 0.2 1.8
Other interest 1.4 0.5 2.5 2.5
------------------------------------- ------- --------------- -------- ------------------
39.0 36.6 112.1 113.1
Less: Amounts capitalised in the
cost of qualifying assets (10.3) (15.0) (26.6) (37.6)
------------------------------------- ------- --------------- -------- ------------------
Financing costs excluding derivative
adjustments 28.7 21.6 85.5 75.5
Change in fair value of derivative
liability component of the 2023
Convertible Bonds (181.2) (56.4) 26.1 15.8
------------------------------------- ------- --------------- -------- ------------------
Net financing costs (154.5) (36.6) 105.3 85.2
------------------------------------- ------- --------------- -------- ------------------
5. Taxation
Third Quarter ended Nine months ended
30 September 30 September
($ in millions) 2018 2017 (restated) 2018 2017 (restated)
-------------------------------------- ------- ------------------ ------ ------------------
Current tax:
Current period 6.5 10.3 12.5 22.0
Adjustments in respect of prior
periods 0.7 - 2.5 1.5
-------------------------------------- ------- ------------------ ------ ------------------
Total current tax 7.2 10.3 15.0 23.5
-------------------------------------- ------- ------------------ ------ ------------------
Deferred tax:
Origination and reversal of temporary
differences 7.9 0.5 18.0 11.0
Adjustments in respect of prior
periods (3.4) - (8.6) 0.9
-------------------------------------- ------- ------------------ ------ ------------------
Total deferred tax 4.5 0.5 9.4 11.9
-------------------------------------- ------- ------------------ ------ ------------------
Total taxation charge 11.7 10.8 24.4 35.4
-------------------------------------- ------- ------------------ ------ ------------------
6. Net Borrowings
These balances are shown net of unamortised deferred finance
costs, which have been allocated as follows:
At 30 September 2018 At 31 December 2017
Deferred Deferred
finance Net finance
($ in millions) Amount costs balance Amount costs Net balance
-------------------------- ------- -------- -------- ------- -------- -----------
Current:
Bank overdrafts 0.7 - 0.7 0.3 - 0.3
Deferred satellite
payments 1.7 - 1.7 3.1 - 3.1
Ex-Im Bank Facilities 122.2 - 122.2 122.2 - 122.2
-------------------------- ------- -------- -----------
Total current borrowings 124.6 - 124.6 125.6 - 125.6
-------------------------- ------- -------- -------- ------- -------- -----------
Non-current:
Deferred satellite
payments 4.4 - 4.4 5.6 - 5.6
Senior Notes due
2022 1,000.0 (4.2) 995.8 1,000.0 (5.1) 994.9
- Net issuance discount (3.7) - (3.7) (4.5) - (4.5)
Senior Notes due
2024 400.0 (4.3) 395.7 400.0 (4.9) 395.1
Ex-Im Bank Facilities 386.5 (8.6) 377.9 508.7 (14.9) 493.8
Convertible Bonds
due 2023 561.6 (5.7) 555.9 549.2 (6.6) 542.6
- Accretion of principal 9.8 - 9.8 12.4 - 12.4
-------------------------- ------- -------- -----------
Total non-current
borrowings 2,358.6 (22.8) 2,335.8 2,471.4 (31.5) 2,439.9
-------------------------- ------- -------- -------- ------- -------- -----------
Total borrowings 2,483.2 (22.8) 2,460.4 2,597.0 (31.5) 2,565.5
-------------------------- ------- -------- -------- ------- -------- -----------
Cash and cash equivalents (293.8) - (293.8) (144.9) - (144.9)
Short-term deposits (50.9) - (50.9) (342.0) - (342.0)
-------------------------- ------- -------- -------- ------- -------- -----------
Net borrowings 2,138.5 (22.8) 2,115.7 2,110.1 (31.5) 2,078.6
-------------------------- ------- -------- -------- ------- -------- -----------
For further details of the Group's debt structure please refer
to note 19 of the 2017 Annual Report.
7. Fair value of financial instruments
The Group's derivative financial instruments consist of forward
foreign currency contracts which are primarily designated as cash
flow hedges and the conversion liability component of the
Convertible Bonds due 2023.
The Group generally does not hedge foreign currency
transactions. Where there is a material contract with a foreign
currency exposure, a specific hedge to match the specific risk will
be evaluated. At present the Group only hedges certain foreign
currency milestone payments to Airbus for the construction of the
I-6 satellites.
The fair values at the Balance Sheet date were:
At 30 September At 31 December
($ in millions) 2018 2017
----------------------------------------------- --------------- --------------
Financial assets:
Forward foreign currency contracts -
designated cash flow hedges 0.3 1.5
Forward foreign currency contracts - - -
undesignated cash flow hedges
----------------------------------------------- --------------- --------------
Total derivative financial assets 0.3 1.5
----------------------------------------------- --------------- --------------
Financial liabilities:
Conversion liability component of 2023
Convertible Bond (151.8) (125.7)
Forward foreign currency contracts- designated
cash flow hedges (5.1) (9.9)
Forward foreign currency contracts -
undesignated cash flow hedges - (0.1)
----------------------------------------------- --------------- --------------
Total derivative financial liabilities (156.9) (135.7)
----------------------------------------------- --------------- --------------
Net derivative financial liability (156.6) (134.2)
----------------------------------------------- --------------- --------------
The fair values of forward foreign exchange contracts are based
on the difference between the contract amount at the current
forward rate at each period end and the contract amount at the
contract rate, discounted at a variable risk-free rate at the
period end.
On issuance the Convertible Bond 2023 was bifurcated between a
cash debt and conversion liability component, as shown below. The
cash debt component meets the definition of net borrowings and over
the term of the bond will accrete up to the principal value of
$650m with the cost of that accretion recognised in net financing
costs. The conversion liability component represents the value of
the conversion rights associated with the instrument and is
accounted for at fair value through profit and loss.
The fair value of the conversion liability is calculated as the
difference between the fair value of the Convertible Bond (being
the principal multiplied by the closing bond price at the Balance
Sheet date) and the accreted balance of the cash debt component. At
30 September 2018, the fair value of the Convertible Bond was
$723.2m and the accreted balance of the cash debt component was
$571.4m, meaning the conversion liability was valued at $151.8m. As
shown in the table below, the movement in the conversion liability
from December 2017 to 30 September 2018 of $26.1m has been
recognised in the income statement through net financing costs:
($ in millions) At 30 September 2018 At 31 December 2017 On issuance
------------------------------- -------------------- ------------------- -----------
Cash debt component 571.4 561.6 545.5
Conversion liability component 151.8 125.7 104.5
------------------------------- -------------------- ------------------- -----------
Total fair value 723.2 687.3 650.0
------------------------------- -------------------- ------------------- -----------
The impact of the unrealised conversion liability will reverse
to nil if the convertible bonds reach maturity and are not
converted.
The Group has no financial instruments with fair values that are
determined by reference to significant unobservable inputs i.e.
those that would be classified as level 3 in the fair value
hierarchy, nor have there been any transfers of assets or
liabilities between levels of the fair value hierarchy. There are
no non-recurring fair value measurements.
Except as detailed in the following table, the Directors
consider that the carrying value of non-derivative financial assets
and liabilities approximately equal to their fair values:
At 30 September 2018 At 31 December 2017
Carrying Fair Carrying Fair
($ in millions) Value value value value
--------------------------- ------------------------------- ------ -------------- -----------
Financial liabilities:
Senior Notes due 2022 1,000.0 996.1 1,000.0 1,000.8
Senior Notes due 2024 400.0 406.7 400.0 408.1
Ex-Im Bank Facilities 508.7 508.9 630.9 639.7
Convertible Bonds due 2023 571.4 723.1 561.6 687.3
--------------------------- ------------------------------- ------ -------------- -----------
8. Dividends Payable
($ in millions) At 30 September 2018 At 30 September 2017
------------------------------------------------------------------- -------------------- --------------------
Final dividend for the year ended 31 December 2017 of 12 cents ($)
(year ended 31 December 2016: 33.37 cents ($)) per share 55.0 151.2
------------------------------------------------------------------- -------------------- --------------------
Dividends in statements of changes in equity 55.0 151.2
Dividends settled in shares (15.6) (31.2)
------------------------------------------------------------------- -------------------- --------------------
Dividends settled in cash 39.4 120.0
------------------------------------------------------------------- -------------------- --------------------
The Board declared, and on 19 October 2018 paid, an interim
dividend of 8.00 cents ($) per ordinary share to ordinary
shareholders on the share register at the close of business on 14
September 2018. Dividend payments were made in Pounds Sterling
based on the exchange rate from the WMReuters GBP/USD 9am fix
(London time) four business days prior to the date of announcement
of the scrip reference price. In accordance with IAS 10, this
dividend has not been recorded as a liability at 30 September
2018.
With effect from the 2016 interim dividend, we introduced a
scrip dividend election opportunity for shareholders, to take their
cash dividend entitlement in Inmarsat shares. For our 2018 interim
dividend the scrip amounted to 1,044,660 new shares (0.22% of the
then issued share capital). These shares were issued and made
available for trading on 19 October 2018. As at 19 October 2018,
Inmarsat plc had 462,617,429 shares in issue.
9. Earnings per share
Earnings per share for the three and nine months ended 30
September 2018 has been calculated based on the profit attributable
to equity holders for the period and the weighted average number of
ordinary shares in issue (excluding shares held by the Employee
Benefit Trust).
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive ordinary shares. These represent share options
and awards granted to employees under the employee share plans.
Third Quarter Nine months ended
ended 30 September
30 September
2018 2017 (restated) 2018 2017
($ in millions) (restated)
------------------------------------ --------------- --------------- ----- -----------
Profit attributable to equity
holders of the Company 227.5 112.7 95.4 151.2
------------------------------------ --------------- --------------- ----- -----------
Weighted average number of ordinary
shares in issue (m's) 458.0 452.0 458.0 452.1
Potentially dilutive ordinary
shares (m's) 6.2 4.4 6.2 4.4
------------------------------------ --------------- --------------- ----- -----------
Weighted average number of diluted
ordinary shares (m's) 464.2 456.4 464.2 456.5
------------------------------------ --------------- --------------- ----- -----------
Basic earnings per share ($ per
share) 0.50 0.25 0.21 0.33
Diluted earnings per share ($
per share) 0.49 0.25 0.21 0.33
------------------------------------ --------------- --------------- ----- -----------
10. Adjusted earnings per share
Adjusted earnings per share for the three and nine months ended
30 September 2018 has been calculated based on profit attributable
to equity holders adjusted for the pre-tax impact of the change in
the fair value of the conversion liability component of the 2023
Convertible Bonds.
Third Quarter Nine months ended
ended
30 September 30 September
2018 2017 2018 2017
($ in millions) (restated) (restated)
-------------------------------------- ------- ----------- ------------ -----------
Profit attributable to equity holders
of the Company 227.5 112.7 95.4 151.2
Adjusted for:
Increase/(decrease) in fair value
of conversion liability component
of 2023 Convertible Bonds (181.2) (56.4) 26.1 15.8
Adjusted profit attributable to
equity holders of the Company 46.3 56.3 121.5 167.0
-------------------------------------- ------- ----------- ------------ -----------
Weighted average number of ordinary
shares in issue (m's) 458.0 452.0 458.0.0 452.1
Potentially dilutive ordinary shares
(m's) 6.2 4.4 6.2.2 4.4
-------------------------------------- ------- ----------- ------------ -----------
Weighted average number of diluted
ordinary shares (m's) 464.2 456.4 464.2.2 456.5
-------------------------------------- ------- ----------- ------------ -----------
Basic adjusted earnings per share
($ per share) 0.10 0.12 0.27 0.37
Diluted adjusted earnings per share
($ per share) 0.10 0.12 0.26 0.37
-------------------------------------- ------- ----------- ------------ -----------
11. Contingent liabilities
The Group is subject to periodic legal claims in the ordinary
course of its business, none of which is expected to have a
material impact on the Group's financial position. There have been
no material changes to the Group's contingent liabilities from
those reported in the financial statements for the year ended 31
December 2017.
12. Events after the balance sheet date
There have been no other material events since the balance sheet
date.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm to the best of their knowledge that:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34, "Interim Financial Reporting"
(b) the interim management report includes a fair review of the
information required by Disclosure and Transparency Rule ('DTR')
4.2.7R, being an indication of important events during the first
nine months and description of principal risks and uncertainties
for the remaining three months of the year; and
(c) the interim management report includes a fair review of the
information required by DTR 4.2.8R, being the disclosure of related
parties' transactions and changes therein.
The Directors of Inmarsat plc are listed on our website at
www.inmarsat.com.
By order of the Board,
Rupert Pearce Tony Bates
Chief Executive Officer Chief Financial Officer
7 November 2018 7 November 2018
APPIX 1: ALTERNATIVE PERFORMANCE MEASURES ("APMs")
The Directors use APMs to better understand the underlying
financial performance of the Group and to provide comparability of
information between reporting periods and business units. The
measures are also used in discussions with the investment analyst
community and the credit rating agencies. Given that APMs are not
defined by International Financial Reporting Standards they may not
be directly comparable with other companies who use similar
measures. APMs used in these financial statements are:
APM Description and Reconciliation
--------------------------- ----------------------------------------------------
1. EBITDA EBITDA is defined as profit for the year
before net financing costs, taxation, depreciation
and amortisation, gains/losses on disposal
of assets, impairment losses and share
of profit of associates. EBITDA is a commonly
used industry measure which helps investors
to understand the contribution made by
each of our business units. It reflects
how the effect of growing revenues and
cost management deliver value for our shareholders.
This has been reconciled to both operating
profit and profit after tax on page 10.
--------------------------- ----------------------------------------------------
2. Adjusted PAT Adjusted PAT is defined as Profit after
Tax excluding the non-cash impact of the
unrealised movement in the fair value of
the conversion liability component of the
2023 convertible bond. A reconciliation
to Profit after tax can be found on page
10.
--------------------------- ----------------------------------------------------
3. Cash Capex Cash capital expenditure is the cash flow
relating to tangible and intangible asset
additions, it includes capitalised labour
costs and excludes capitalised interest.
Cash capex indicates our continued investment
in the growth and development of our network
and infrastructure as well as our investment
in the future technologies of the business.
This has been reconciled to total capital
expenditure within Note 3.
--------------------------- ----------------------------------------------------
4. Adjusted EPS Adjusted Earnings Per Share is computed
as Group Adjusted Profit After Tax attributable
to equity holders of the Company divided
by the weighted average number of shares
in issue (excluding shares held by the
Employee Trust). Growth in adjusted EPS
is a measure of our ability to deliver
profitable growth by increasing our revenue
and delivering cost efficiencies across
the Group, thereby delivering value for
our shareholders. Please refer to Note
10 for the reconciliation of Adjusted EPS
to EPS.
--------------------------- ----------------------------------------------------
5. Free Cash Flow Free Cash Flow represents how much cash
is available to pay back borrowings, distribute
to investors or invest in the business
in future periods. This has been reconciled
to the net increase or decrease in cash
and cash equivalents on page 12.
--------------------------- ----------------------------------------------------
6. Underlying effective The underlying effective tax rate is used
tax rate to analyse differences from the corporate
tax rate which are implicit to business
operations rather than driven by accounting
adjustments. For the quarter, this has
been calculated by taking the tax charge
($11.7m) add prior year adjustments ($2.7m)
and less revaluation of deferred tax balances
($0.9m) divided by PBT ($239.4m) adjusted
for the impact of the unrealised conversion
liability of the convertible bonds ($181.2m).
--------------------------- ----------------------------------------------------
7. Business Unit Operating This is indicative of the cash generated
Cash Flow by the relevant business unit for the period
in review. It is calculated by taking EBITDA
less cash capex. Both EBITDA and Cash Capex
have been defined above and reconciled.
--------------------------- ----------------------------------------------------
APPIX 2: ACCOUNTING POLICY CHANGES
IFRS15 'Revenue from contracts with customers'
The Group has adopted IFRS15 on 1 January 2018 using the fully
retrospective method. Two revenue streams were identified as areas
requiring Group policy change to align with IFRS15. These are
revenues from the Ligado contract and installation revenues.
The impact due to these changes is set out below:
Third Quarter ended Nine months ended
30 September 2017 30 September 2017
($ in millions) Reported IFRS 15 Restated Reported IFRS 15 Restated
-------------------- -------- ------- -------- -------- ------- --------
Revenues 358.3 (2.1) 356.2 1,046.5 (6.6) 1,039.9
Other operating
costs (55.9) 4.1 (51.8) (154.1) 11.8 (142.3)
-------------------- ------- -------
EBITDA 191.3 2.0 193.3 567.8 5.2 573.0
Depreciation and
amortisation (102.2) (1.2) (103.4) (294.1) (3.4) (297.5)
-------------------- -------- ------- -------- -------- ------- --------
Operating profit 86.1 0.8 86.9 270.3 1.8 272.1
Financing income 36.3 0.3 36.6 (86.1) 0.9 (85.2)
-------------------- -------- ------- -------- -------- ------- --------
Profit before tax 122.4 1.1 123.5 184.2 2.7 186.9
Tax (10.4) (0.4) (10.8) (34.6) (0.8) (35.4)
-------------------- -------- ------- -------- -------- ------- --------
Profit after tax 112.0 0.7 112.7 149.6 1.9 151.5
-------------------- -------- ------- -------- -------- ------- --------
Total comprehensive
income 117.6 0.7 118.3 164.9 1.9 166.8
-------------------- -------- ------- -------- -------- ------- --------
Within the income statement, the main impact of IFRS 15 is on
the treatment of installation revenue which was previously
recognised in full on completion of the work. Under IFRS15,
installation revenue is in most instances added to the transaction
price and spread over the contract period. Similarly installation
costs, which were previously expensed on installation, are now
capitalised and depreciated over the contract period. These changes
flow through to the balance sheet leading to increases in property,
plant and equipment due to the capitalisation of installation costs
and an increase in deferred income, reported within trade and other
payables, reflecting the corresponding delay in the recognition of
installation revenue.
As at 30 September 2017 As at 31 December 2017
($ in millions) Reported IFRS 15 Restated Reported IFRS 15 Restated
------------------------ ----------------------- ------- -------- -------- ------- --------
Non-current assets
Property, plant
and equipment 3,149.3 16.4 3,165.7 3,236.6 18.9 3,255.5
Deferred income
tax asset 42.4 (0.1) 42.3 35.6 (0.2) 35.4
------------------------ ----------------------- ------- -------- -------- ------- --------
Current assets
Trade and other
receivables 306.9 21.5 328.4 319.4 25.0 344.4
------------------------ ----------------------- ------- -------- -------- ------- --------
Total assets 4,889.9 37.8 4,927.7 4,959.5 43.7 5,003.2
------------------------ ----------------------- ------- -------- -------- ------- --------
Current liabilities
Trade and other
payables 543.2 44.9 588.1 584.6 49.8 634.4
------------------------ ----------------------- ------- -------- -------- ------- --------
Non-current liabilities
Deferred income
tax liabilities 222.9 0.8 223.7 237.3 1.1 238.4
------------------------ ----------------------- ------- -------- -------- ------- --------
Total liabilities 3,593.4 45.7 3,639.1 3,704.2 50.9 3,755.1
------------------------ ----------------------- ------- -------- -------- ------- --------
Net assets (Equity) 1,296.5 (7.9) 1,288.6 1,255.3 (7.2) 1,248.1
------------------------ ----------------------- ------- -------- -------- ------- --------
The Ligado impact is largely limited to the balance sheet with
payments which were contractually deferred and were previously
offset against deferred revenue now being recognised as
receivables.
Third Quarter ended Nine months ended
30 September 2017
30 September 2017
($ in millions)1 Reported IFRS 15 Restated Reported IFRS 15 Restated
------------------------ --------- -------- -------- -------- ------- --------
Cash generated
from operations 183.8 3.8 187.6 577.5 11.2 588.7
------------------------ -------- -------
Net cash inflow
from operating
activities 185.3 3.8 189.1 563.9 11.2 575.1
Purchase of property,
plant and equipment (79.4) (3.8) (83.2) (347.6) (11.2) (358.8)
------------------------ --------- -------- -------- -------- ------- --------
Net cash used in
investing activities (167.3) (3.8) (171.1) (190.0) (11.2) (201.2)
------------------------ --------- -------- -------- -------- ------- --------
Net (decrease)/increase
in cash and cash
equivalents (52.4) - (52.4) 85.3 - 85.3
------------------------ --------- -------- -------- -------- ------- --------
In the cash flow statement the impact of the accounting policy
change is limited to the reclassification of installation costs
from cash generated from operations into investing activities. The
overall movement in cash remains unchanged.
IFRS16 'Leases'
IFRS16 has been adopted by the Group on 1 January 2018 using the
modified retrospective approach which allows for the recognition of
the lease liability and asset as at 1 January 2018 with no
restatement of prior period financial statements.
The main impact is around property leases where the Group is the
lessee.
Balance Sheet as at 1 January
2018
($ in millions) Reported IFRS16 Post IFRS16
--------------------------------- ---------- ------- ------------
Non-current assets
Right of use asset - 75.7 75.7
Total assets 4,959.5 75.7 5,035.2
--------------------------------- ---------- ------- ------------
Current liabilities
Trade and other payables 584.6 (11.5) 573.1
Obligations under finance leases - 13.1 13.1
--------------------------------- ---------- ------- ------------
Non-current liabilities
Obligations under finance leases - 74.1 74.1
Total liabilities 3,704.2 75.7 3,779.9
--------------------------------- ---------- ------- ------------
Net assets (Equity) 1,255.3 - 1,255.3
--------------------------------- ---------- ------- ------------
A lease liability of $87.2m has been calculated using the
present value of the unpaid lease payments over the lease term
specific to each lease, using the incremental borrowing rate as the
discount rate. The liability has been separated between a current
($13.1m) and a non-current liability ($74.1m). A right of use asset
of $75.7m has been created based on the lease liability, adjusted
by $11.5m of accruals related to the phasing of lease payments.
There was an EBITDA benefit of $3.3m in the quarter from
lease-related costs being accounted for as depreciation and
interest rather than indirect costs. Overall there was no impact to
PBT due to the forex gain of $0.7m offsetting the interest charge
of $0.7m.
1 The reported numbers in the cash flow table above have not
been adjusted for the impact of reclassification of short term
deposits which is discussed later in this appendix. The restated
numbers above therefore need to be considered in aggregate.
IFRS9 'Financial Instruments'
IFRS9 has been adopted in January 2018. There has been no
material impact on 2018 or prior year reported numbers.
In Q4 2017, the Group changed the basis for recognising short
term deposits with a maturity less than 3 months to more accurately
reflect the requirements of IAS7. Previously short term deposits
with less than 3 months remaining until maturity at the reporting
date were classified as cash and cash equivalents. This has been
changed so that only those short-term deposits that have a 3 month
maturity at their acquisition date are classified as cash and cash
equivalents. As a result, the comparative financial numbers for the
year to Q3 2017 have been restated.
The impact on short term deposits was an increase of $95.7m to
$282.3m and cash & cash equivalents net of bank overdrafts were
reduced by $95.7m to $251.1m. The overall impact on current assets
is zero and is detailed in the table below:
Third Quarter ended Nine months ended
30 September 2017 30 September 2017
($ in millions) Reported Adj. Restated Reported Adj. Restated
-------------------------- ---------- ------- -------- ------------------- ------ --------
Cash and cash equivalents
--------------------------- --------- ------- -------- ------------------- ------ --------
At beginning of the
period 399.2 (298.6) 100.6 261.5 - 261.5
Net increase/(decrease)
in cash and cash
equivalents (52.4) 202.9 150.5 85.3 (95.7) (10.4)
--------------------------- --------- ------- -------- ------------------- ------ --------
Sub-total (net of
bank overdrafts) 346.8 (95.7) 251.1 346.8 (95.7) 251.1
--------------------------- --------- ------- -------- ------------------- ------ --------
Short term deposits
At beginning of the
period 116.4 298.6 415.0 395.0 395.0
Net (decrease)/increase
in short term deposits 70.2 (202.9) (132.7) (208.4) 95.7 (112.7)
--------------------------- --------- ------- -------- ------------------- ------ --------
Sub-total 186.6 95.7 282.3 186.6 95.7 282.3
--------------------------- --------- ------- -------- ------------------- ------ --------
Total cash, cash
equivalents and short
term deposits 533.4 - 533.4 533.4 - 533.4
--------------------------- --------- ------- -------- ------------------- ------ --------
The impact on the cash flow statement can be seen in the
following table:
Third Quarter ended Nine months ended
30 September 2017 30 September 2017
($ in millions) Reported Adj. Restated Reported Adj. Restated
(1)
------------------------ -------- ----- -------- -------- ------ --------
Short-term cash
deposits >3 months (70.2) 202.9 132.7 208.4 (95.7) 112.7
------------------------ -------- ----- -------- -------- ------ --------
Net cash used in
investing activities (167.3) 202.9 35.6 (190.0) (95.7) (285.7)
------------------------ -------- ----- -------- -------- ------ --------
Net (decrease)/increase
in cash and cash
equivalents (52.4) 202.9 150.5 85.3 (95.7) (10.4)
------------------------ -------- ----- -------- -------- ------ --------
1 The reported numbers in the table above have not been adjusted
for the impact of IFRS15 which is discussed earlier in this
appendix. The restated numbers above therefore need to be
considered in aggregate.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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