Inmarsat — H1 2010 Earnings Presentation
39 slides from Inmarsat's earnings presentation, Aug 6, 2010
Slide 1: Inmarsat plc Interim Results 2010
Inmarsat plc Interim Results 2010 6 August 2010
Slide 2: Forward-looking statements
Forward-looking statements Certain statements in this presentation constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual result
Slide 3: Interim Results 2010 - Andrew Sukawaty
Interim Results 2010 Andrew Sukawaty Chairman & Chief Executive Officer
Slide 4: 2010 Interim results highlights
2010 Interim results highlights Total revenue up to 12.2% to $570.7m (2009: $508.7m) • Inmarsat Global revenue up 9.3% to $367.8m (2009: $336.6m) EBITDA up 15.4% to $334.4m (2009: $289.9m) • Inmarsat Global EBITDA up 14.0% to $278.0m (2009: $243.9m) Operating profit up 33% to $220.1m (2009: $165.2m)
Slide 5: Inmarsat Global – MSS revenue
Inmarsat Global – MSS revenue US$m +9.4% 400 $362.9 $331.6 55.8 Leasing +13% 300 49.4 Aero +40% 49.6 35.5 70.0 Land +14% 79.8 200 Maritime +1% 100 176.7 177.7 0 HY 2009 HY 2010 5
Slide 6: Stratos – revenue
Stratos – revenue US$m +12.2% 400 $355.8 $317.2 Broadband +64%⁽¹⁾ 76.7 300 46.9 62.3 Other MSS +3% 64.0 200 Inmarsat MSS +3% 100 208.0 215.1 0 HY 2009 HY 2010 ⁽¹⁾ Stratos Broadband revenue includes revenue from Segovia since 10 January 2010 6
Slide 7: IsatPhone Pro service launch
IsatPhone Pro service launch Service launched on 30 June Factory production underway Strong positive feedback 13 distribution partners Retail handset price $500-600 Airtime price ~ $1 per min Stratos – 2,000 advance orders 7
Slide 8: Interim dividend 2010
Interim dividend 2010 +10% US$ cents Dividend growth sustained at 15 14.00 2009 level 12.73 Dividend supported by EBITDA and profit growth 10 Dividend policy unchanged in light of Inmarsat-5 investment decision 5 Expect to sustain 10% dividend growth for the next three years (2010 – 2012) 0 HY 2009
Slide 9: Interim Results 2010 - Rick Medlock
Interim Results 2010 Rick Medlock Chief Financial Officer
Slide 10: Inmarsat plc – 2010 interim results
Inmarsat plc – 2010 interim results Half year US$m 2010 2009 Revenue 570.7 508.7 12.2% Operating costs (236.3) (218.8) (8.0%) EBITDA 334.4 289.9 15.4% Depreciation & amortisation (114.9) (116.5) Other 0.6 (8.2) Operating profit 220.1 165.2 33.2% Net interest payable (68.3) (68.2) Profit before tax 1
Slide 11: Inmarsat plc - 2010 cash flow
Inmarsat plc - 2010 cash flow Half year US$m 2010 2009 EBITDA 334.4 289.9 Working capital/non-cash items (8.9) (4.9) Operating cash flow 325.5 294.8 Capital expenditure (59.4) (73.9) Capitalised operating costs (8.2) (10.3) Cash interest (52.8) (54.0) Cash tax (11.5) (6.7) Free cash flow 193.6 149.9
Slide 12: Inmarsat plc – net debt June 2010
Inmarsat plc – net debt 30 June 2010 US$m 1,600 $1,305 1,400 $415m of available liquidity Convertible through cash and undrawn Bond 2017 $277 1,200 facilities 1,000 €225m European Senior Investment Bank facility Notes $650 800 2017 signed to fund Alphasat 600 $269m of Stratos debt EIB Facility repai
Slide 13: Inmarsat plc – financial summary
Inmarsat plc – financial summary Revenue growth on target and handheld service launched on schedule We remain on track to deliver solid revenue growth in 2010 Setting 5-year target average annual revenue growth rate for our Inmarsat Global MSS revenues of 5-7%, 2010 - 2014 Leverage down, liquidity s
Slide 14: Introducing Inmarsat-5 & Global Xpress
Introducing Inmarsat-5 & Global Xpress Investing for New Growth Andrew Sukawaty Chairman and Chief Executive Officer
Slide 15: Inmarsat Global Xpress overview
Inmarsat Global Xpress overview Address incremental broadband opportunities in the maritime, energy and government sectors 3 satellites Global $1.4bn market opportunity Ka-band coverage with established growth 5-year $500m annual revenue Operational $1.2bn 2014 target Major new investment 50 MB/s pr
Slide 16: Global Xpress competitive advantages
Global Xpress competitive advantages Global Xpress - the first true global VSAT type service ‘Leapfrog’ Ku-band development path 50 MB/s to 60cm antennas; 10 MB/s to 20cm Major cost advantage over Ku-band on cost per MB 500MHz of Ka-band spectrum available for MSS Unique hybrid network with L-band H
Slide 17: Investment rationale
Investment rationale Capture long-term structural Address government MSS growth in VSAT maritime and broadband demand and shortfall energy segments in proprietary capacity Inmarsat-5 Ka-band global network Complements L-band franchise, Diversify business risk and upgrade path and expanded optimise n
Slide 18: A $1.4bn market opportunity
A $1.4bn market opportunity VSAT services, $1.4bn, Estimated global FSS revenue 9%⁽²⁾ was $14.5bn in 2008, excluding DTH/DBS and satellite radio Of the $14.5bn, $1.4bn was capacity purchased for VSAT applications Robust VSAT industry growth due to increased development of Ku- band coverage, mobility
Slide 19: VSAT market analysis
VSAT market analysis Maritime, energy and Maritime VSAT space Energy VSAT space segment, government segments are segment, $135m, 10%⁽¹⁾ $152m, 11%⁽³⁾ substantial and have established growth US DoD, ROW ⁽²⁾Gov’t commercial FSS, Segment Annual Growth ⁽⁴⁾ $502m, 37% Maritime ~22% Energy ~9% Government
Slide 20: Opening the wider maritime market
Opening the wider maritime market Inmarsat is the maritime market $1,800 leader, but not currently in fast Maritime VSAT Annual Revenues (USD$ millions, retail) $1,600 growing VSAT segment Iridium Maritime $1,400 Inmarsat Maritime The broader maritime segment… $1,200 $1,000 • O&G rigs & exploration
Slide 21: Maritime and energy VSAT market
Maritime and energy VSAT market Others inc. Stratos MTN 23% 14% Maritime and energy retail VSAT market Vizada valued at $672m in 2008 14% Established, diversified Dedicated Schlumberger retail distribution network 15% 10% Nessco/Ivsat Ka-band global coverage, 1% Ship Equip CapRock 7% MCS (Harris) 5%
Slide 22: Government / military market
Government / military market Bandwidth needs for US DoD expanding US DoD already the largest user of Recent US Navy contract required 4 commercial satellite capacity commercial partners for single solution Insufficient proprietary capacity Next generation system cancelled, TSAT Existing and planned
Slide 23: US government capacity requirements
US government capacity requirements US DoD projects ramping demand for commercial satellite capacity Source: National Security Space Office 2007 23
Slide 24: Aeronautical opportunities
Aeronautical opportunities Upgrade path for heavy Swift 64 and SwiftBroadband users Inmarsat-5 will support future aeronautical growth opportunities Choice of L-band and Ka-band service options Significant cost of service and coverage advantages over competing Ku-band solutions for passenger service
Slide 25: Introducing Inmarsat-5 & Global Xpress - Rupert Pearce
Introducing Inmarsat-5 & Global Xpress Investing for New Growth Rupert Pearce SVP Inmarsat Enterprises
Slide 26: Inmarsat-5 system overview
Inmarsat-5 system overview Three geostationary satellites providing global commercial broadband services • 89 fixed spot-beams per satellite • Global coverage • Coverage reconfigurable in orbit • High throughput Each Inmarsat-5 has 20x the capacity of each Inmarsat-4 Next generation capability = glo
Slide 27: Global spot-beam coverage
Global spot-beam coverage The world’s first global mobile VSAT / broadband service 27
Slide 28: Why Ka-band?
Why Ka-band? Spectrum • 3.5 GHz of available spectrum – 7 times the availability at Ku • Includes 500 MHz of MSS spectrum • Major cost advantage over Ku-band on cost per MB • Fewer operational satellites Inmarsat has existing orbital slots available Ka-band can piggy-back off established Ku-band tec
Slide 29: Boeing distribution agreement
Boeing distribution agreement Boeing has committed to a distribution contract, guaranteeing revenue for Inmarsat-5 Ka-band Minimum contract value represents >10% of target Ka-band revenues in first 5 years Boeing will distribute both Ka- and L-band Inmarsat services High potential to procure further
Slide 30: Route to market
Route to market Existing Existing VSAT distribution providers partners End user markets Exciting opportunities for distribution channel 30
Slide 31: Core strategy roadmap
Core strategy roadmap ATC S-band Aero passenger connectivity Government / Military Embedded UAVsin govt. /military programmes Managed services VSAT services Maritime & Energy Capacity leasing Handheld voice Global Ka-band Network Low data rate services Global L-band Network Established growth - Broa
Slide 32: Introducing Inmarsat-5 & Global Xpress - Rick Medlock
Introducing Inmarsat-5 & Global Xpress Investing for New Growth Rick Medlock Chief Financial Officer
Slide 33: Financial considerations
Financial considerations $1.2bn new capital expenditure over 4 years, includes: • 3 satellites under fixed price US$ contract with Boeing • To be contracted: launch vehicles, launch insurance, ground infrastructure, terminal development • Capitalised developments costs Inmarsat-5 allows for replacem
Slide 34: Capex profile and rolling procurement
Capex profile and rolling procurement Capex deferment benefit US$m relative to replacement plan 600 for L-band only network 500 400 300 200 100 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Core Maintenance Stratos Maintenance Alphasat Inmarsat 6 Inmarsat 5 34
Slide 35: Financing considerations
Financing considerations No immediate funding needs for Inmarsat-5 • Over $400m of available liquidity at 30 June • Generating substantial free cash flow • Strong support from existing lenders Potential Export Credit Agency financing available • Application process with US Ex-Im Bank underway • Pote
Slide 36: Investor return considerations
Investor return considerations Target $500m of annual Ka-band revenue 5 years after global service launch Retain long term superior growth rate with strong return on investment No impact on dividend policy and potential to grow dividends from existing business growth Capex spend spread over 4.5 year
Slide 37: Summary
Summary Investment into proven markets with established growth Diversifies and strengthens the Inmarsat business model Opportunity to ‘leap-frog’ other technologies and trump existing offerings with global coverage Plays to Inmarsat’s core competencies in satellite network engineering and mission cr
Slide 38: Q&A
Q&A The presentation slides and a webcast recording of this presentation will be available from our website from 6 August 2010
Slide 39: Notes Page
Notes Page Slide 18 A $1.4bn market opportunity ⁽¹⁾ $14.5bn based on the State of the Satellite Industry Report (June 2009). S.I.A. report prepared by Futron Corporation. This analysis excludes direct satellite TV (e.g. DirecTV and EchoStar) and direct satellite radio. ⁽²⁾ $1.4bn is based on the Com