Inmarsat delivers earnings beat on maritime demand

Satellite operator Inmarsat said strong growth in demand for broadband communications on ships and aircraft was countering U.S. defence spending cuts, and had helped it beat earnings expectations in the second quarter.

The company, which provides communications to shipping, aircraft and remote locations worldwide, reported core earnings of $174 million, a slight dip on $176 million a year ago, but well ahead of market expectations.

“It’s a steady quarter,” chief executive Rupert Pearce said in an interview on Friday. “The maritime franchise continues to show very solid growth, with data revenues up 9 percent.”

The company was on track to achieve the top end of its target of 0-2 percent compound annual growth in maritime revenues in the period 2011-2013, he said.

Shares in the group rose to a three-month high of 725 pence in early deals on Friday after the results. They were trading up 6 percent at 717 pence by 0813 GMT, outperforming a 0.3 percent stronger mid-cap index.

Analysts at Jefferies said Inmarsat was delivering on multiple fronts, and had posted core earnings 9.5 percent ahead of its forecast.

“We have seen outperformance and continued strong subscriber growth in the core MSS (maritime) business,” they said.

LAUNCH DELAY

Inmarsat said it was also seeing good growth in aviation, with revenues up 13.2 percent in the first half, thanks in part to demand from commercial airlines such as Emirates.

But overall revenue for the second quarter dipped slightly, from $394 million to $391 million, because of defence cuts.

“(We are) still seeing a little bit of paralysis, the pipeline has slipped…,” Pearce said.

“Tough times, but if you take a longer term view (…) in an era of increasing budget constraints, there’s a likelihood of increasing reliance on commercial satcoms by the U.S. government and others.”

Inmarsat is investing in a new satellite network, called Global Xpress, that will provide a step up in capacity and communications speeds next year.

But the timing of launch of the first satellite has been thrown into doubt by the failure last month – the third in 12 months – of the Russian Proton-M launch rocket.

“We continue to have confidence (in Proton),” Pearce said. “We are looking at other options should this pattern continue, but at the moment we retain confidence in Proton.

“We still expect the first launch this year, possibly a modest delay of up to a couple of months, but we still expect global service by the end of 2014.”

On Thursday, Inmarsat agreed a deal with RigNet, a U.S. company that provides communications to the energy sector, to buy capacity on its Global Xpress and L-Band services.