LONDON (Alliance News) - Satellite telecommunications company Inmarsat PLC said Thursday it swung to a loss in the first half of 2018, prompting a cut to its dividend.
The FTSE 250-listed company posted a pretax loss in the six months ended June of USD119.1 million, versus a USD63.4 million profit a year before.
Inmarsat's revenue increased 4.9% to GBP717.2 million from GBP683.7 million. This was driven, mainly, by the company's Aviation division revenue increasing 39% to GBP115.5 million from GBP83.2 million.
The swing to a loss can be attributed a doubling in net financing costs to USD259.8 million from USD121.8 million a year before. In the second quarter alone, Inmarsat's net financing costs increased to USD256.4 million from USD37.3 million.
The telecommunications company's financing costs rose due to the "significant" increase in the unrealised conversion liability on the 2023 convertible bond following American communications company EchoStar Corp's takeover attempt of Inmarsat in June.
The fair value of the conversion liability is calculated as the difference between the market value of the convertible bond and the book value of the cash element of the convertible bond.
The price increased substantially due to the takeover attempt but has since "reduced sharply", leaving a charge on Inmarsat's income statement.
Inmarsat's operating profit also decreased in the first half by 24% to USD140.7 million from USD185.2 million year-on-year.
The satellite company attributed this to the launch of its I-5 F4 and S-Band satellites in the fourth quarter of 2017 led to a 20% increase in depreciation and amortisation in the first half, to USD232.5 million from USD194.1 million.
The company is proposing an interim dividend of 8 cents per share, down from 21.62 cents per share the year before, in line with its new dividend policy. Inmarsat took the step to reduce its full-year dividend to 20.0 cents per share at the end of financial year 2017.
Looking ahead, Inmarsat is targeting mid-single digit revenue growth on average over the next five years, with earnings before interest, tax, depreciation and amortisation expected to improve steadily.
The company expects its financial year 2018 revenue, excluding Ligado Networks, to be USD1.30 billion to USD1.50 billion.
Chief Executive Officer Rupert Pearce said: "Inmarsat produced a robust set of results for the first half of 2018, delivering against a number of key strategic objectives and maintaining our continued positive operational momentum across a resilient and diversified growth portfolio. This performance highlights the quality of our business and our differentiated market position, which ensured significant market capture gains were achieved across our target end markets in the period. Consequently, we remain well placed to deliver further consistent revenue growth in the short term and to capture significant additional growth opportunities over the medium to long term."
Shares in Inmarsat were down 5.0% Thursday at 552.60 pence each.