Inmarsat determined to grow in-flight internet at expense of profits

Satellite operator Inmarsat reported higher third quarter revenues thanks to encouraging maritime sales but lower profits as it continues to invest in grabbing market share in airline in-flight internet.

The FTSE 250 group said "markets remain challenging and the outlook continues to be difficult to predict", though it was confidence about the medium to long term outlook thanks to progress in its maritime, government and aviation segments.

Full year profits in 2017 and 2018 will continue to be "particularly determined" by the success or otherwise with airline in-flight connectivity and in government, as flagged earlier this year.

For the three months ended 30 September, group revenue rose 4.8% to $358.3m as maritime sales were flat on the equivalent period last year but grew sequentially for the second consecutive quarter, while government aviation and enterprise sales all rose.

Aviation moved up to become the group's third biggest segment after maritime and government with a 50% rise to $53.9m.

Group earnings before interest, tax, depreciation and amortisation declined 6.5% to $191.3m as higher revenues were more than offset by the increasing share of aviation, which is lower margin, plus further investment in IFC, and by higher central operational delivery costs.

Revenue guidance for the full year was tightened to $1.225-1.275bn from the previous $1.2-1.3bn, which implies lower profits and earnings as margins are impacted by increased lower-margin business from IFC and investment in growing and implementing the product.

All other guidance was unchanged.

Chief executive Rupert Pearce hailed higher Government and Enterprise revenues but focused on Aviation, where sales were supported by the continued expansion of contracted IFC aircraft order book to 1,300 aircraft after winning a contract with Air Asia.

"We have continued to invest in this significant opportunity, and in our core operational capabilities, albeit at the expense of lower EBITDA margins, to ensure that we remain uniquely positioned as the leading operator in global mobility markets.

"Consequently, whilst our markets remain challenging and the outlook continues to be difficult to predict, I remain confident about the medium to long term prospects for Inmarsat."