Propelling a satellite into space is no mean feat. Nor is it a cheap one, as demonstrated by half-year results from Inmarsat (ISAT). In May, the group finally thrust into orbit the fourth satellite of its GX constellation, which – along with other capital requirements – sent total cash capital expenditure (capex) up 116 per cent to $301m (£229m). That, alongside a slight drop in the amount of cash generated from operations, meant free cash flow of $21.5m was a big drop from $218m in last year's first half.
But Inmarsat had always warned that 2017 was going to be a period of heavy spending, so these costs shouldn’t really come as a surprise. The good news is that the modernised network is attracting new customers in the maritime, aviation and government divisions, with the latter two reporting double-digit revenue growth. US government demand is particularly strong and revenue here was up 57 per cent thanks to the group’s contracts with Boeing, the US Navy and AT&T.
But a $72m one-off net financing cost from the revaluation of the group’s new convertible bonds meant the strong revenue growth failed to boost profit. Meanwhile, capex demands sent depreciation and amortisation charges up by a tenth, meaning operating profit fell 5 per cent to $184m. Continued expenditure in the second half of the year means broker JPMorgan expects a 38 per cent drop in full-year EPS to 33ȼ, from adjusted cash profit of €753m.
| INMARSAT (ISAT) | ||||
| ORD PRICE: | 753p | MARKET VALUE: | £3.43bn | |
| TOUCH: | 752-753p | 12-MONTH HIGH: | 889p | LOW: 595p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 258ȼ* | NET DEBT: | 171% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2016 | 629 | 154 | 27 | 20.59 |
| 2017 | 688 | 61.8 | 8 | 21.62 |
| % change | +9 | -60 | -70 | +5 |
| Ex-div: | 14 Sep | |||
| Payment: | 20 Oct | |||
| *Includes intangible assets of $762m, or 167ȼ a share £1=$1.31 | ||||
