Inmarsat profit drops amid weak government spending

Satellite communications provider Inmarsat posted a drop in full year profit amid weak global government spending.

In the year to the end of December, pre-tax profit slid 17.3% to $282m (£200m) on flat revenues of $1.27bn.

Total revenue from government, meanwhile, was down 10.4% from 2014 to $286.6m.

Inmarsat said operational budgets and activity levels are key drivers of governments' expenditure on commercial satellite services, and both of these continue to exert downward pressure on satellite operators' revenues and margins.

In the US, budget challenges continue and contingency rather than baseline funding remains the key driver of commercial satellite expenditure.

Still, Inmarsat said demand for satellite communications services continues to be strong in certain key areas of operations, with spending there holding up or even increasing.

“In other developed country government markets similar budget pressures, and the volatility of short-term operational requirements, also dominate the satellite spend. But in these countries too, the demand for connectivity is increasing and there are areas of growth in a generally adverse environment,” it said.

On the bright side, aviation revenue was up $25.7m to $126.8m, and the company proposed a final dividend increase of 5% to 31.78 cents a share.

Chief executive Rupert Pearce said: “2015 has been another year of solid achievement during a period of transition as we bring our Global Xpress services to market and establish our new European Aviation Network.

“We have been equal to the challenges of some very difficult market conditions whilst putting in place the foundations for an exciting future with higher growth and a more diversified business.”

The company successfully launched the second and third Inmarsat-5 Global Xpress Ka-band satellites in February and August 2015 respectively and in December, it announced Global Commercial Service Introduction for Global Xpress.

The group said it now has the satellite platform in place to deliver a steadily growing material new revenue stream.

Inmarsat said the medium-term outlook remains encouraging amid growing global demand for high speed mobile data communications.

However, the underlying trading environment this year is expected to be broadly similar to 2015.