Inmarsat share price: Group slashes revenue guidance

Inmarsat (LON:ISAT) has updated investors on its first-quarter performance this morning, unveiling a drop in revenue and profits. Going forward, the company has revised down its 2016 revenue guidance by by $50m to between $1,175m and $1,250m.

**Highlights from Inmarsat’s statement:**
· We are competing well in challenging markets, growing market share and diversifying the business successfully. The foundations for future double-digit revenue growth are largely established, with the GX network now global.
· In the first quarter, Government performed better than for many quarters, with revenues rising, and Aviation delivered another quarter of double digit growth. First quarter trading was however weaker than expected in Maritime and Enterprise reflecting market headwinds. Costs continue to be tightly controlled.

· We continue to make good progress with Global Xpress (‘GX’) and the European Aviation Network (‘EAN’). The GX global service proposition is bedding down well with strong customer interest across all markets and the launch of commercial services in Maritime and Enterprise. Some GX opportunities are slipping into 2017, which is not unexpected with the launch of a new service. Good progress continues to be made on the delivery of the EAN.
· Ligado Networks (‘Ligado’) elected for the 30MHz option. Variations to the Cooperation Agreement were agreed under which Ligado will pay Inmarsat $337m over 2016 to 2018. Additionally the transition was postponed and extensive spectrum usage rights were granted to Inmarsat until Ligado receives its FCC license and moves to deploy ATC services.
· As a consequence of the above we are revising 2016 guidance for revenues (excluding Ligado) down to a range of $1,175m to $1,250m. The new guidance for Ligado revenues is higher than expected.
· The medium term outlook and guidance remains unchanged.
Rupert Pearce, Inmarsat’s Chief Executive Officer, commented,
“Many of our markets face short-term headwinds which intensified in the first quarter, leading to a softer revenue performance than expected, although we remain highly competitive in each of our core markets, growing market share and diversifying the business to plan. Sustained recession in global maritime and energy markets continues, and in Maritime in particular good growth in our newer products continues to be more than offset by the decline of our older products and by lay-ups and scrappage of installed ships. Government provided a brighter spot, particularly outside the US and Aviation continued to grow at substantial double digit rates.
Alongside our core business, we have continued to make strong progress on the introduction of Global Xpress and our European Aviation Network, although this progress has yet to feed through into revenues. We are gratified by very strong customer interest, across the board. In Maritime, our order book is expanding as expected. In Aviation, discussions with several large airlines continue to progress well, our DLH and Singapore Airlines wins are now moving into implementation, and the creation of our EAN continues on track. In Government, we are seeing strong interest from a diverse customer base globally and early sales to thought-leaders. In Enterprise, we are working closely with RigNet to introduce GX to the resources sector. However, bedding down our global GX network and engaging customers with a novel technology naturally takes time, and we are seeing a modest deferral of our expected 2016 revenues into 2017. We continue to be very confident in the medium and long term growth and diversification prospects that GX and the EAN bring to Inmarsat.
We are pleased to announce that we have agreed transitional arrangements with Ligado under which we will secure approximately $337m of payments from Ligado in respect of 2016 to 2018, under the 30MHz spectrum option, with transition to the new plan postponed and Inmarsat being granted enhanced spectrum usage rights until Ligado receives its FCC license and meets certain other conditions. As part of these arrangements, Inmarsat has agreed to defer certain contracted payments, which will provide Ligado with the best opportunity to establish a successful and sustainable long-term business to the benefit of both parties.
Whilst in the near term business growth will continue to be challenging in choppy markets, we remain very well positioned for future growth and diversification, and indeed I remain confident that the foundations that we are establishing will deliver the expected medium term growth.”
As of 07:30 BST, Thursday, 05 May, Inmarsat Plc share price is 930.00p.