FTSE 250 satellites network operator Inmarsat (ISAT) reported an in-line first quarter of 2018 on Wednesday. Yet the firm’s share price has rallied strongly, up 9% at 394.8p.
This surge comes in spite of earnings before interest, tax, depreciation and amortisation (EBITDA) declining 4.5% to $175m on revenues that nudged 4.8% higher at $345m.
Strip out its Ligado/Lightsquared US joint venture, EBITDA actually fell 6.1% to $143m on revenues up 5% at $313m.
AVIATION GROWING BUT LITTLE ELSE IS
Most of its growth is currently coming from the Aviation industry, where Inmarsat is signing airlines to take its superfast, inflight broadband services, although Enterprise growth is not bad either (revenue up 11% at $33m), which is a pleasant surprise.
Aviation revenues jumped 39% to $56m in the quarter, making this now the company’s third biggest revenue generator.
But Maritime barely grew again, up just 1.6% to $142m, while its work with various Government agencies fell 9% to $78m.
LONG-RUN DECLINES
You have to go back to 2015 to find any consistent growth in the share price of Inmarsat (see the chart here). Odd rallies in the stock (summer 2016 say, or the start of 2017) failed to last and were quickly nipped in the bud and followed by significant share price weakness.
Investors are clearly taking comfort that 2018 and medium term guidance has been reiterated and there were no nasty surprises in the update. Inmarsat has already faced the inevitable music by cutting its dividend in March, a move we predicted in December.
Considering that the stock has more than halved over the past 12 months from 824.5p, today’s update, and share price rise, is scant consolation for investors.
