Speedcast International Limited , the world’s most trusted
provider of remote communication and IT solutions, today announced its
preliminary financial results for the six months ended 30 June 2019 (H1 2019).
H1 2019 overview
– Group revenue up 17.3% to $357.6 million (H1 2018: $304.8 million)
– Statutory NPAT loss of $175.5 million included a small positive impact
due to AASB 16 and a $154.8 million negative impact from the impairment of
goodwill relating to the performance of the non-Government operating segment
– Underlying results better reflect the true performance of the business
and exclude the impact of the goodwill impairment:
EBITDA, excluding $4.6 million impact of AASB 16, up 3.0% to $62.2 million
(H1 2018: $60.4 million)
NPATA of $14.7 million (H1 2018: $21.1 million)
– Operating cash flow of $23.9 million with cash conversion of 36% of
Underlying EBITDA (H1 2018: 89%) due to working capital deterioration and
non-recurring expenses
– Net debt increased to $625 million at 30 June 2019 (31 December 2018:
$586 million) due to non-! recurring acquisition and Globecomm integration
costs, negative working capital (that is expected to reverse in H2 2019) and
payment of the final 2018 dividend
– Continue to target Leverage Ratio (net debt: proforma EBITDA) to be
below 4.0x at the end of 2019.
Commenting on the H1 2019 results, Speedcast CEO Pierre-Jean Beylier said:
“The first half of this financial year was a very challenging six months
for Speedcast. The Board and management are disappointed with the Company’s
financial performance, the lower than anticipated contribution from Globecomm
and slower organic growth. Significant steps have been taken to address our
operational performance and return Speedcast to growth.”
“We have substantial opportunities across our operating divisions to drive
organic growth and deliver strong future outcomes for our customers, staff,
suppliers, and shareholders. We have enhanced the flexibility in our debt
facilities while having a stron! ger focus on more tightly managing working
capital and capital expenditure to support a positive turnaround in cash flows
in the second half of this year,” added Mr. Beylier.
H1 2019 Divisional performance
– Maritime: Total revenue was up 12.0% to $119.3 million (H1 2018: $106.5
million) driven by the contribution from Globecomm. Excluding Globecomm,
Maritime total revenue was down 1.7% to $104.7 million while within this
Service revenue was up 3.1% to $97.0 million.
– Enterprise and Emerging Markets: Total revenue was up 6.8% to $79.6
million (H1 2018: $74.5 million) driven by the contribution from Globecomm.
Excluding Globecomm, Enterprise and Emerging Markets’ revenue was down 21.4% to
$58.6 million, mainly due to the phasing of the nbn project. This Division’s
performance is now improving with service revenue stabilised and good momentum
in several markets.
– Government: Total revenue was up 69.3% to $80.4 million (H1 2018: $47.5
million) driven by the contribution from Globecomm, with under! lying organic
revenue flat. However, new customer programs are expected to drive growth in
services revenue once the implementation cycle is complete in H2 2019.
– Energy: Total revenue was up 2.6% to $78.3 million (H1 2018: $76.3
million) mainly due to the contribution from Globecomm, with underlying organic
revenue up 0.2%. The oil & gas sector and our Energy business have
stabilised. A stronger H2 2019 is expected driven by Systems Integration
revenue, continued growth in onshore oil services and slight pick-up in
offshore drilling activity.
Commenting on the performance of Speedcast’s operating divisions over H1 2019,
Mr. Beylier said: “Industry and operating challenges over the first half
have led to subdued organic growth which, combined with the underperformance of
Globecomm, led to the disappointing financial performance. We are responding to
the market challenges and have undertaken a thorough analysis of our business
to put in place an oper! ating plan to address the issues faced. Having
commenced rolling out our plans, we have seen early positive results that we
believe support our expectations for the second half of 2019.”
“The strength of our product and service offering, and approach to
supporting our customers, can be seen in the continued strong demand we have
experienced for our services. Over 20 new and extended contracts were announced
in the first half, representing a small part of our overall wins during the
period, and we have a strong pipeline to drive further growth. Our strategic
initiatives focused on operational improvements and systems and processes integration
will provide the right structure to deliver the organic revenue and earnings
growth in the second half of 2019 and beyond, while also reducing our cost base
in a manageable way,” added Mr. Beylier.
Balance sheet – within Leverage Ratio covenant
Speedcast’s cash balance of $54.6 million at 30 June 2018 was impacted by
capital investment and one-off expenses including non-! recurring expenses
related to the acquisition of Globecomm. Cash conversion was 36%, and the
Company expects a second half cash flow performance more in line with
historical averages of above 80% given fewer one-off cash expenses and a
positive working capital movement.
Net Debt of $625 million was up $39 million (31 December 2018: $586 million)
reflecting non-recurring cash outflows of $13 million associated with M&A
activity and Globecomm integration, the $8 million dividend payment and $42
million negative movement in working capital.
The Board has not declared a dividend for H1 2019 and does not intend to
declare a dividend for H2 2019. The Company will reconsider future dividend
payments in light of its objectives to reduce debt and also invest in organic
growth opportunities.
Outlook
Over the medium term, Speedcast continues to expect healthy growth in
Maritime – both in commercial shipping and in cruise – where bandwidt! h needs
continue to grow. Government is expected to grow with continued increase in
defense spending and revenue synergies from the Globecomm integration expected
in 2020 and beyond. Energy’s return to growth will provide an uplift in
Underlying EBITDA margin, and while market conditions in Enterprise and
Emerging Markets remain challenging, Speedcast expects to return to growth in
this sector due to market share gains and scale.
Speedcast reaffirms its previous guidance for 2019 full year EBITDA in the
range between $150 million to $160 million (including $10 million of Leasing
reclassification benefit).
In addition, for the 2019 full year, the Company expects:
– Moderate organic growth in H2
– Globecomm underlying EBITDA expected to be ~$21 million, including cost
synergies of ~$11 million ex Leasing reclassification benefit
Expecting $18-20 million of Globecomm cost synergies in 2020
– Expected cost savings of $10 million in H2, equating to $20 million of
annualised savings
– Targeting $50 million of capex
– No dividend to be declared for H2
– Leverage Ratio target below 4.0x at end of 2019.
