Inmarsat — H1 2017 Earnings Presentation
31 slides from Inmarsat's earnings presentation, Aug 3, 2017
Slide 1: Interim Results 2017
INMARSAT > Interim Results 2017 Interim Results 2017 3 August 2017
Slide 2: Mid-year review
INMARSAT > Interim Results 2017 Mid-year review Rupert Pearce Chief Executive Officer
Slide 3: Market context
Market context Structural Change Demand Side Supply Side Inmarsat • Will remain a key feature • Rise of a digital society, • Risk of over-capacity remains • Driving into new satellite of our industry powered by the “Internet of in certain geographies and for broadband markets in mobility Things” spe
Slide 4: Our strategy
Our strategy Grow and diversify by serving the Digital Society with our unique capabilities Best Best Best Best networks solutions distribution organisation Driven by our unique position in mobility in Maritime, Government, Aviation and Enterprise
Slide 5: Operational Review - H1 2017
Operational Review - H1 2017 Continued focus on operational execution in challenging markets ˃ Group revenue up 9% to $688m, with EBITDA, up 2% to $376m in H1 2017 − GX generated revenue of $60m in H1 2017, including $28m in Q2 2017 ˃ Maritime − Against tough comparator in Q2, strong growth in highe
Slide 6: Maritime - the market opportunity
Market share Maritime - the market opportunity 2017 Small vessel market Mid-market VSAT / high bandwidth • Inmarsat products: Fleet One • Inmarsat products: FleetBroadband • Inmarsat products: XpressLink, Fleet Xpress • Market size: 690,000 vessels • Market size: 60,000 vessels • Market size: 20,000
Slide 7: Maritime – progress in H1 2017
Maritime – progress in H1 2017 Driven by continued demand for higher bandwidth services L-band Ka-band Fleet One Fleet BroadBand Fleet Xpress > Over 2,000 > A solid performance, despite > Installation programme ahead of schedule, with over vessels now weak market conditions 1,300 vessels now install
Slide 8: Aviation: BGA & SOS – the market opportunity
Aviation: BGA & SOS – the market opportunity Business & General Aviation and Safety & Operations Services market Market size: Market size: BGA: 2016: $200m SOS: 2016: $50m 2025: $600m (Long haul only) 2025: $100m Key Drivers > Growth in connected jets in BGA – from 21,000 in 2016 to 34,000 in 2026 >
Slide 9: Aviation: IFC – the market opportunity
Aviation: IFC – the market opportunity Growth in connected aircraft Regional split of new expected connected aircraft 2,400 5,200 13,900 7,600 Europe 500 1,900 Asia Pacific North America 800 1,400 Middle East x 2.2 LatAm 600 1,000 400 400 Regional focus 400 areas for Inmarsat Twin aisle Single aisle
Slide 10: The European Aviation Network
The European Aviation Network On track for commercial deployment in Q4 2017 EAN Proposition vs current IFC offerings Response to recent competitor claims > Higher capacity > Inmarsat is delivering EAN in accordance with framework established by European laws and implemented by national > Wider cover
Slide 11: Aviation – progress in H1 2017
Aviation – progress in H1 2017 Strong growth continues Business & General Aviation Safety In-flight connectivity services & Operational Services for Commercial Aviation > Continued double digit revenue growth in > Qatar Airways and Avianca contracts won in Q2 2017 SwiftBroadband and Classic Aero > O
Slide 12: Government – the market opportunity
Government – the market opportunity Government/military satcom global capacity revenues Key Drivers: Major events | Budgets | Technology | Contract wins
Slide 13: Government – progress in H1 2017
Government – progress in H1 2017 US International Boeing partnership Higher operational tempo continues in one region CSSC contract ramping up Continued focus on New contract wins – driven by geographic diversification renewed emphasis on direct sales - over 30 countries served Involvement in FirstN
Slide 14: Enterprise – the market opportunity
Enterprise – the market opportunity Core Connectivity Markets Future markets Oil & Gas Mining Intelligent transport Smart Agriculture e2e logistics Media Aid & NGO Smart Cities Smart grids E-government 14
Slide 15: Enterprise – progress in H1 2017
Enterprise – progress in H1 2017 Legacy products remain under pressure Focused on “Internet-of-Things” in the short term opportunities in the long term > Impacted by challenging and competitive markets, in > Positive growth trajectory continues in M2M particular BGAN > Incubating key potential growt
Slide 16: Asset Base Development – progress in H1 2017
Asset Base Development – progress in H1 2017 Continuing to develop our organizational capability Launch of Inmarsat-5 F4 > Successful launch with SpaceX > Provides in-orbit redundancy and additional capacity, as and when required Investing in our organisational capability > Initially positioned over
Slide 17: H1 2017 performance - summary
H1 2017 performance - summary Strong progress against our key priorities for 2017 Maritime Government Asset base Drive FleetBroadband ARPU Internationalise, diversify and Maintain high service and and value, progress Fleet Xpress innovate to deliver further value to connectivity levels for L-band an
Slide 18: Financial Review
INMARSAT > Interim Results 2017 Financial Review Tony Bates Chief Financial Officer
Slide 19: Group Income statement – H1 and Q2 2017
Group Income statement – H1 and Q2 2017 $m H1 2017 H1 2016 Change Q2 2017 Q2 2016 Change Revenue 688.2 629.0 59.2 356.0 330.4 25.6 Operating costs (311.7) (260.6) (51.1) (161.0) (128.2) (32.8) EBITDA 376.5 368.4 8.1 195.0 202.2 (7.2) Depreciation & Amortisation (192.3) (174.5) (17.8) (96.2) (84.6) (
Slide 20: H1 2017 Business Unit Summary
H1 2017 Business Unit Summary Maritime ($m) 2017 2016 Government ($m) 2017 2016 Aviation ($m) 2017 2016 Revenue 278 290 Revenue 188 141 Revenue 90 65 Direct Costs 41 42 Direct Costs 28 18 Direct Costs 8 2 Gross Margin 237 85% 248 86% Gross Margin 160 85% 123 87% Gross Margin 82 91% 63 97% Indirect C
Slide 21: Maritime Results – H1 2017
Maritime Results – H1 2017 ˃ VSAT revenue up $9.7m, 19.5%, to $59.7m $m − FX installation rate ramping up assisted by partners 350 − Now 3600 ships, increasing order book 300 − ARPU lower due to increasing impact of distribution agreements 289.7 250 278.4 ˃ Decline in FleetBroadband revenue of $8.3m
Slide 22: Maritime Revenue trends
Maritime Revenue trends 2016 2017 $m Q1 Q2 Q3 Q4 Q1 Q2 VSAT (XL and FX) 24.8 25.2 17% 25.2 27.8 29.2 30.5 22% FleetBroadband 89.7 94.3 64% 92.9 91.3 87.8 87.9 63% Other (mainly low margin and legacy) 28.6 27.1 18% 24.8 23.7 22.1 20.9 15% Total Maritime Revenue 143.1 146.6 100% 142.9 142.7 139.1 139.
Slide 23: Government Results – H1 2017
Government Results – H1 2017 ˃ Growth in the US $m − Revenue up 57.2% 200 − Material new, high margin, contract impacting Q2 180 187.5 − Boeing ToP contract 160 − CSSC contract ramping up 140 140.7 137.8 − FirstNet contract – no impact in 2017 120 100 ˃ Growth outside the US 101.2 80 − Revenue up 4.
Slide 24: Aviation Results – H1 2017
Aviation Results – H1 2017 ˃ Growth in Core BGA and Safety $m − Total core revenues up $16.9m, (26%) to $81.5m 100 − SwiftBroadband up $13.3m, (32%), to $55.2m 90 − Classic Aero up $2.5m, (15%), to $19.3m 80 90.1 70 ˃ Investment in In-Flight Connectivity (GX) 60 64.6 − Installation revenues of $8.6m
Slide 25: Enterprise Results – H1 2017
Enterprise Results – H1 2017 ˃ Markets continue to be tough $m − Revenue down $10.2m, (14%) to $62.3m 80 ˃ BGAN -21% 70 − Continuing decline (particularly energy & media) 72.5 60 ˃ GSPS -20% 62.3 50 54.0 − Airtime flat, terminal sales -46% 40 ˃ FleetBroadband -29% 43.6 30 − Oil and Gas users and usa
Slide 26: Group Cash Flow
Group Cash Flow US$m H1 2017 H1 2016 Change Q2 2017 Q2 2016 Change EBITDA 376.5 368.4 8.1 195.0 202.2 (7.2) Working capital/non-cash items 17.2 49.0 (31.8) 15.7 16.3 (0.6) Operating cash flow 393.7 417.4 (23.7) 210.7 218.5 (7.8) Capital expenditure (300.8) (139.1) (161.7) (170.6) (100.6) (70.0) Inte
Slide 27: Capital Expenditure
Capital Expenditure US$m H1 2017 H1 2016 Change Q2 2017 Q2 2016 Change Major infrastructure projects 203.5 100.2 (103.3) 127.3 66.3 (61.0) Success-based capex 53.4 23.1 (30.3) 23.4 10.5 (12.9) Other 58.8 34.2 (24.6) 29.0 12.8 (16.2) Cash flow timing (14.9) (18.4) (3.5) (9.1) 11.0 20.1 Total cash cap
Slide 28: Net debt
Net debt ˃ $1,094m liquidity at 30 June 1,894.8 Net debt 2,005.8 − Cash $516m 2,500 +394.4 − Revolving Credit Facility $500m 394.4 394.7 -131.8 2,000 − Undrawn Ex-Im Facilities $78m 993.9 +1.2 994.4 1,500 ˃ Average interest rate on Gross Debt of 4.43% 1,000 541.5 +211.5 (Dec 2016 4.41%) 548.1 500 61
Slide 29: Future Guidance
Future Guidance Remains unchanged ˃ 2017 revenue, excluding Ligado, of $1,200m to $1,300m ˃ 2018 revenue, excluding Ligado, of $1,300m to $1,500m ˃ EBITDA margin will be adversely impacted by: − Addition of lower margin service revenues and higher indirect costs in Aviation IFC − Higher central oper
Slide 30: Forward looking Statements
Interim Results 2017 3 August 2017 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 actu
Slide 31: Q&A
INMARSAT > Interim Results 2017 Interim Results 2017 Q&A