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Inmarsat signals lower capex

The group’s sales were buoyed by strong growth in the aviation business
March 8, 2019

Inmarsat’s (ISAT) top-line growth for 2018 was underpinned by a 40.9 per cent rise in aviation revenues to $256m (£195m). In turn, this stemmed from a doubling of in-flight connectivity sales (IFC). That said, efforts to become a bigger player in the broadband ‘IFC’ arena weighed on aviation’s cash profit margin, which slipped from 57.2 per cent to 51.5 per cent. Somewhat reassuringly, management expects this to recover over the next three years.

IC TIP: Hold at 412p

The government division also performed strongly, with 3.9 per cent revenue expansion to $381m. This largely came courtesy of the segment’s US operation, which enjoyed an 18.8 per cent sales increase in the fourth quarter alone.

Meanwhile, Inmarsat’s largest division – maritime – endured a 2.6 per cent sales dip to $553m. Cash profits here also declined by 4 per cent to $429m, reflecting higher costs, including provisions against potential future bad debts. Still, bosses are confident about growing the business’s share of the “highly valuable and fast-growing” VSAT (very small aperture terminal) market.

Broker JPMorgan expects pre-tax profits of $73m, with EPS of 13ȼ, against $168m and 27ȼ in 2018.

INMARSAT (ISAT)   
ORD PRICE:411.6pMARKET VALUE:£1.9bn
TOUCH:411.4-412.3p12-MONTH HIGH:646pLOW: 334p
DIVIDEND YIELD:3.7%PE RATIO:20
NET ASSET VALUE:288ȼ*NET DEBT:163%
Year to 31 DecTurnover ($bn)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
20141.2934276.048.94
20151.2733863.051.39
20161.3329965.053.96
2017 (restated)**1.3923441.033.62
20181.4716827.020.00
% change+5-28-34-41
Ex-div:18 Apr   
Payment:30 May   

*Includes intangible assets of $800m, or 173ȼ a share

**2017 figures have been restated for new accounting rules IFRS 15

£1=$1.31