Inmarsat Plc Euro.0005 (ISAT)

Company overview

Inmarsat is the world's leading provider of global mobile satellite communications. The company provides voice and high-speed data services to almost anywhere on the planet - on land, at sea and in the air and operates 11 satellites in geostationary orbit 35,786km above the Earth, controlled from its HQ in London via ground stations located around the globe. The Company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

HL Comment (2 November 2011)

Inmarsat PLC, the leading provider of global mobile satellite communications services, today (2Nov) provided a trading update spanning the three months ended 30 September 2011. The company, which provides communications to ships, aircraft and the military, reported a 18.4% rise in third-quarter profits to $224.4 million, beating analysts' expectations. Revenue in its global business rose 22% to $245.2 million. The group said its LightSquared spectrum sharing agreement in North America boosted its revenue to $56.4 in the quarter including $3.5 million of operating costs. Elsewhere, revenue in the company's core Mobile Satellite Services (MSS) unit fell 2% to $180.7 million, (2010: $185.1m). Whilst third quarter MSS results were in line with group expectations, management added that it was unlikely to see consistent evidence of a return to MSS revenue growth until next year.

Negative Points:

• In the land mobile sector, a decline in revenue from government and military users in Afghanistan continued to impact on performance. As a result, the land mobile sector revenues may remain under pressure for some time.
• Within the maritime sector, results continued to be adversely impacted by customer migration to the Fleet Broadband service where pricing is typically lower than the older services being replaced.
• Increased competition in Inmarsat's core maritime market and other markets in which it operates (land, aeronautical) could impact.
• A general lack of visibility in military spending may impede growth.

Positive Points:

• The payment of $56.4 million from LightSquared ensured overall revenue and profit growth in the quarter. The U.S. firm, which is building a nationwide mobile broadband network, is paying Inmarsat to share its spectrum.
• Inmarsat confirmed that following the completion of significant new financing in the first half of 2011, the group remained fully-funded for all its capital needs for the foreseeable future.
• Inmarsat is a world class Mobile Satellite Service (MSS) operator with good management, a solid strategic position and multiple options for future growth potential.
• During the quarter Inmarsat purchased 13.2m shares at a total cost of $94m as part of its buyback programme introduced in Q2.

Consensus:

On balance, market consensus indicates a buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Values are quoted in the stock's local currency: US dollar.