1 May 2019 12:14
INMARSAT PLC - ANNUAL GENERAL MEETING STATEMENT: 1 MAY 2019
Inmarsat plc held its 2019 Annual General Meeting at 10am this morning at which the Company's Chairman, Andrew Sukawaty, and Rupert Pearce, CEO, made the following statement.
ANDREW SUKAWATY: CHAIRMAN
Good morning, ladies and gentlemen, and welcome to Inmarsat plc's 2019 Annual General Meeting.
As there is a quorum present, I now declare the meeting open.
I would like to start today's meeting by welcoming our board of directors.
· Dr Abe Peled, our senior independent non-executive director; Simon Bax, our Remuneration Committee Chairman; and Rob Ruijter, our Audit Committee Chairman
· Also with us are Sir Bryan Carsberg, Pip McCrostie, Dr Hamadoun Touré and Warren Finegold. We are also delighted to welcome Tracy Clarke to her first Inmarsat AGM; Tracy joined the Board in February this year.
· Unfortunately two of our non-executive directors - retired General Robert Kehler and Janice Obuchowski are not able to be here with us today due to unforeseen personal matters.
· Rupert Pearce, our Chief Executive Officer; and Tony Bates, our Chief Financial Officer along with Alison Horrocks, our Chief Corporate Affairs Officer and Company Secretary are also present.
Shortly Rupert Pearce, our CEO, will provide some comments on our business performance in 2018 and also provide some highlights from our first quarter results for 2019 which we announced this morning. Before he does, I would like to share some comments about Inmarsat and start with some comments about the offer process from the consortium which is currently underway, which is obviously a significant consideration for Inmarsat, the Board and our shareholders.
On 25 March 2019, the boards of Inmarsat and Connect Bidco, a consortium of funds advised by Apax, Warburg Pincus, the Canada Pension Plan Investment Board and the Ontario Teachers' Pension Plan Board, announced that they had agreed the terms of a recommended offer for the entire issued and to be issued ordinary share capital of Inmarsat.
Under the terms of the offer, shareholders who are entitled to the final dividend of 12 cents to be paid on 30 May will be entitled to receive an overall value of $7.21 per share. This will comprise cash consideration of $7.09 per share plus the final dividend of 12 cents per share. The offer will be implemented by way of a Court-sanctioned scheme of arrangement, and the offer and the scheme are subject to shareholder approval at shareholder and court meetings that will be held on 10 May. The scheme Circular, which was published on 18 April, provides details about the Inmarsat Board's recommendation of the offer, and the reasons why the Inmarsat directors who hold shares in Inmarsat will be voting in favour on 10 May.
The Inmarsat Board believes that implementation of our existing strategy would continue to generate significant value for our shareholders as an independent company, however there are risks involved in the implementation of what is a longer-term, capital-intensive strategy. The offer from the Consortium would give our shareholders the opportunity to realise, in cash in the near term, the value of their holdings in Inmarsat at a material premium to the undisturbed share price.
The Inmarsat Board has taken into account, inter alia, the following:
- Factors including the significant ongoing capital expenditure requirements and the timing uncertainties inherent in parts of our strategy;
- The performance of our share price relative to our underlying financial performance and long-term prospects; and
- The Sterling equivalent value of US$7.21 being offered, equates to £5.46 per Inmarsat share. Based on the exchange price of Sterling/Dollar on the date of the announcement of the offer this represents healthy premiums of 27% to the closing Inmarsat share price on 18 March, which was the business day before the commencement of the offer period and a 35% premium to the volume-weighted average price for the three-month period leading up to 18 March
- The offer represents a value of £2.6 billion for all the existing and to be issued ordinary shares in Inmarsat
Accordingly following careful consideration of the above factors, the Inmarsat Board believes that our shareholders should have the opportunity to approve the offer and therefore unanimously has recommended the Consortium's offer to shareholders.
If the shareholder meeting and court meeting resolutions are passed, and other conditions are satisfied or waived, the offer is expected to become effective during the fourth quarter of 2019.
Let me now give some brief commentary about our business.
Inmarsat continued to perform well operationally and financially in 2018, however, headwinds in the sector generally and challenges in our maritime end-market continued to cast a shadow over significant growth in the Aviation and Government business sectors.
In 2018 we saw significant year-on-year revenue growth from our Global Xpress Ka-band service, supported by contributions from Government, Maritime and our Aviation sectors. The Global Xpress programme is seeing significant acceptance across a broad and diversified group of customers putting us in a world-leading position and a head start over other commercial satellite players in this rapidly emerging global mobile broadband satellite opportunity.
Our maritime business continued to see pressure due to the ongoing recession in the commercial shipping industry, as well as increased competition in the mid−market segment, where we have by and large maintained market share in recent years. However, these dynamics have negatively affected pricing and cash flow overall.
Our Global Xpress constellation remains at an early stage of development. Therefore, while significant investment has been made, particularly in the newly emerging In-Flight Connectivity segment in Commercial Aviation, we need to demonstrate its potential for profitability and cashflow generation, as our position in the market develops over time.
We believe that we have a market-leading service to deliver Wi-Fi on aircraft globally. While we continue to build market share and invest to support this, we must also demonstrate that the investment will pay off. We understand this and intend to begin demonstrating the financial performance to investors as the various segments stabilise and bed in.
As we enter our 40th year of operation, it is important to reflect on our heritage serving those in need of critically important communications, often where there is no other means available. This is still a very strong purpose for us today and will remain so in the future, whether through our maritime or aviation safety services and of course also through the ongoing support we give to Télécoms Sans Frontières and the ITU for their work in responding to disaster relief globally. The Board is humbly proud of what Inmarsat offers as a commercial business, as well as the public service it provides to countless users in time of need.
Turning now to the Board. We were delighted to welcome Tracy Clarke as a new director in February 2019. We welcome her global management experience, working in emerging markets, plus her previous Board experience and Remuneration Committee knowledge which will enhance our capabilities as a Board. All our Directors are standing for election or re-election and we believe their contribution over 2018 and into 2019 remains constructive, supportive and properly challenging. We would also like to pay our respects to a former Director, Kathleen Flaherty, who sadly passed away this past year.
As a result of a vote against our 2018 AGM resolution on the implementation of remuneration, we consulted extensively with shareholders during the course of 2018 and in early 2019 to determine their specific concerns and to address them. We would like to take this opportunity to thank shareholders for their time and feedback during this process. As a direct result of these consultations, we have proposed a new Remuneration Policy and have also taken significant steps to address the outcome of 2018 remuneration for the Executive Directors, with the Remuneration Committee exercising their discretion to make a significant reduction in their 2018 remuneration outcome.
I would like to thank our staff for their considerable hard work and commitment to supporting Inmarsat's business in 2018. We cannot do this alone and our distributors, customers, manufacturers and wider ecosystem all play a significant role in our combined success.
Thank you too to our shareholders, many of whom have been invested in Inmarsat since our IPO in 2005. I would now like to hand over to our CEO Rupert Pearce for a further business update.
RUPERT PEARCE - CEO
Good morning ladies and gentlemen. I will summarise some of the key elements of our performance in 2018 and then provide a few comments on our Q1 2019 results announced this morning.
In 2018, we started to capitalise on the strong platform for future growth built across our business in recent years, and delivered consistent revenue and EBITDA growth from diversified sources, through a combination of our robust foundation of established L−band services and our new, higher growth Global Xpress broadband services, particularly in the In−flight Connectivity segment in Aviation.
Our revenue growth was again supported by a focus on operational leverage through a carefully controlled cost base, and an infrastructure capital investment programme that is expected to meaningfully moderate early in the 2020s. These factors give us great confidence that we will be able to drive free cash flow growth in line with our revenue and EBITDA growth, over the medium to long−term.
Looking first at our global mobile broadband ambitions, the development of our Global Xpress network is progressing through three clear development phases, as we go from the initial global infrastructure deployment, through the market validation and capture phase, and then into the long-term growth and infrastructure renewal phase.
During the first phase, from 2010 to 2017, the first four GX satellites were designed, built, launched and deployed, creating the world's first seamless global mobile broadband satellite constellation, with in-orbit redundancy. There is nothing else like it, even today.
The second phase, which began in 2016 and will run through to the end of 2020, focused on the global commercial service introduction of an array of different GX services into each of our key target markets - being maritime, government, aviation and enterprise - and initial revenue generation and scaling, to hit our historic business plan ambitions. By the end of 2018, we had entered all of our target markets successfully and had already built GX revenues to more than $250M in aggregate delivering growth of 85% year-on-year and representing 19% of our aggregate, MSS revenues in that year, a substantial contribution to the group's performance. We remain on track to achieve our target of an annual run rate of $500m of GX revenues by the end of 2020, five years after global commercial service introduction.
By the end of 2018, we had started the third phase in our GX network strategy, as we now look to further augment our GX network through new, highly agile, lower cost technologies. This will allow us to react to market demand, new competitive pressures or future technology disruption far more quickly and efficiently than hitherto, keeping us at the forefront of our industry, driving future growth and high returns on capital. We expect to go under contract on our next generation GX network augmentation in the next few months.
We're also innovating in the L-band, which we believe has sustained relevance and differentiation for our customers. In collaboration with our manufacturing partner, Airbus, we have made excellent progress in our preparation for the launch and entry into commercial service of the first two satellites in our Inmarsat-6 fleet at the start of the next decade, satellites that will not only place us back at the leading edge of L-band capabilities and capacity development for brand new service offerings, but will also provide an extension of life for our legacy L-band services offerings such as the BGAN family of services well into the 2030s. With this development of our core L-band network, we expect to leap-frog the competitive offerings that are due to arrive in the coming years, but which we believe will offer lower levels of service performance compared to the inherent capabilities of our Inmarsat-6 satellites. This puts us in a position to deliver the fastest, highest capacity, most agile and best-value services to the lowest cost and smallest form factor terminals by the start of the next decade.
On the back of this continued exciting innovation, we feel well-placed to continue to serve our customers in unique, value-added ways for the foreseeable future.
This leads me onto discuss briefly our Q1 2019 results which we announced this morning.
We delivered further revenue growth in the first quarter of the year, building on the positive momentum achieved during 2018. This was driven by the success of our diversified growth portfolio in a focussed set of core end-markets, where we lead with sustainable differentiation.
Excluding our stand-alone Ligado business, Group revenue increased by 10.7% to $346.7m, mainly reflecting strong growth in Government and Aviation. Maritime continued to deliver double-digit revenue growth in the fast-growing VSAT segment, which we believe will become a key growth and value-driver in the maritime sector in the years to come and for which we are very well-positioned with our new FX services. Challenges remain in the maritime mid-market, as our FB customers look to migrate to VSAT services including our own, but actions taken at the end of last year are beginning to reduce materially our vessel losses on that transition.
We have seen further customer take-up of key products in both our US and Global Government businesses in Q1 2019 and we continue to believe we are well-placed for long term growth as a leading global player in these markets.
In Aviation, we delivered a material increase in In-Flight Connectivity revenues in the quarter, driven by substantial equipment sales and continued growth in GX airtime revenues. We have also benefited from continued revenue growth from our Core aviation business, composed of the BGA and SOS sub-segments.
Finally, we have felt some continued pressure in the decline of products in legacy markets in our Enterprise Business Unit, which we continue to work hard to redress, as we also gestate new business opportunities in the emerging global satellite IOT sector.
Our EBITDA outcome was lower than last year due to the absence of any material income from Ligado in 2019, as planned, and new unplanned costs relating to the recommended offer for the Group. Allowing for those impacts, our underlying EBITDA grew 18.7% showing our commitment to controlling our costs and delivering an efficient business.
Full details about our Q1 performance are available on our website.
We continue to successfully build and aggressively defend market share in our target markets, and - as far as the Consortium's offer for the Group is concerned - we are very mindful of the risk of the business becoming distracted and so are focused on maintaining "business as usual". It is important that we maintain momentum and business success throughout 2019 whoever our future owners turn out to be, and I am appreciative of the support of our loyal, talented and hardworking staff and business partners around the globe for their continued focus on this.
ANDREW SUKAWATY - CHAIRMAN
Thank you for your investment in Inmarsat. We appreciate your support of our business.