Speedcast Downgraded FY18 Earnings Guidance On Carnival Renewal Contract

Speedcast Downgraded FY18 Earnings Guidance On Carnival Renewal Contract

Speedcast International Limited (ASX: SDA) today unveiled a new agreement that it has entered into with the world’s largest leisure travel company, Carnival Corporation for the renewed term of three years with multi-year extension options.

Leading remote communication and IT solutions provider, Speedcast has agreed to provide remote communications and value-added services across Carnival’s global fleet of cruise ships. It will reportedly include enhanced bandwidth services to deliver high-quality internet services to cruise’s guests.  [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

It is expected that this contract independently will contribute annual revenue of about 8-9% of expected full year 2019 revenue. Beyond connectivity, the company intends to provide an advanced package of value-added service including support for ever-increasing demand for data-driven apps and streaming from individual devices while onboard.

Following the announcement of contract renewal with Carnival Corporation, Speedcast provided an updated estimate for FY18 earnings. The company now anticipates its underlying Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) to be within the range of approximately US$130 million and US$135 million, lower than the previously stated guidance of US$135 million to US$145 million.

Commenting on downgraded earnings guidance, the company stated that the change is primarily driven by the Carnival renewal taking more time than anticipated as well as Energy performing marginally below expectations. Due to delay in decision making for new projects and the slow implementation of the existing plan, Speedcast expects its Energy Revenue to increase slightly from US$76 million in 1H2018 to estimated US$82-84 million in 2H 2018, significantly less than the previous expectation. Moreover, the actual results of Speedcast’s 2018 full year results are scheduled to be announced on 26 February 2019.

The company further stated the Globecomm’s business is on track and initial integration planning has confirmed cost synergy estimate of approximately US$15 million deliverables throughout 18 months.

Speedcast’s Chief Executive Officer, PJ Beylier stated that there lies a significant growth potential following the full integration of Harris Caprock with market share wins in the 2H of 2018, especially in EEM and Maritime. Mr. Beylier further added that 2019 seems to be a promising year as the company has built a strong platform concerning scale, capabilities and healthy organic growth over the past five years.

In today’s trading session, Speedcast shares plunged -4.801% or $0.145 to last trade at $2.875 as at 27 December 2018. SDA stock last traded at a PE of 47.190 x with a market capitalization of a $723.07 million. In the past 12-months, the stock has witnessed a negative performance change of 42.48% including a decline of 25% over the past three months.


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