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Inmarsat cuts dividend to focus on in-flight wi-fi
Satellite operator Inmarsat on Friday said it would cut its annual dividend to 20 cents a share as it cited issues over payments from a US partner and a desire to cash in on the growing in-flight wi-fi market.
The company said it would pay a final dividend of 12 cents a share, making a total of 33.62 cents per share, adding future payouts would stay at the lower level "until the cash flow of the business rebuilds sufficiently to make an increase appropriate".
Fourth quarter earnings before interest, tax, depreciation and amortisation (EBITDA) fell 26% to $163.7m. For the full year EBITDA was 8% lower at $731.5m. Group revenue increased by 5.4% to $1.4bn.
It added that payments from Ligado, which is a US satellite company that uses Inmarsat's spectrum, would pause in 2019 and resume in 2020 at around $136m a year. Ligado is currently waiting for a government licence.
Inmarsat said it still expected current revenue, excluding Ligado, to be in the range of $1.30bn - $1.50bn.
"Should Ligado obtain its licence from the Federal Communications Commission in 2018, there would be no pause in 2019," Inmarsat said.
Chief executive Rupert Pearce said the company delivered further operational and strategic progress in 2017, "comprising both gratifying near term revenue growth as well as several important strategic proof-points around exciting medium term growth opportunities, especially in in-flight communications (IFC)".
"Our investment in Global Xpress (GX), our high bandwidth global mobile satellite network, is starting to show material returns, generating over $140m of revenue in the year," he said.
"Our strategic investment in GX will enable us to retain and develop our competitive positions in maritime and government and will ensure that we are well placed to access the substantial opportunity in IFC in aviation."
Pearce said Inmarsat was targeting mid-single digit percentage revenue growth (excluding Ligado) on average over the next five years.
He added that EBITDA and free cash flow generation (both excluding Ligado) were expected to improve steadily as a result of the combined impact of a growing revenue base, an improved revenue mix, tightly managed overhead costs and new, lower cost, satellite technologies being implemented that "to drive a meaningful moderation in our annual infrastructure capex over the medium term".