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On 26 February 2019, Speedcast International Limited (ASX:SDA), a Satellite network service provider from the communication services industry, announced its full FY2018 results for the year ended 31 December 2018.
During the CY2018, the company reported an increase in the Group revenue by 21% to US$623 million as compared to the previous corresponding period. The underlying EBITDA went up by 7% to US$132 million on pcp.
The underlying EBITDA margin during the period declined to 21.2% in CY2018. It was impacted as a result of dilution from the UltiSat acquisition that closed in November 2017, phase 1 of the NBN contract, as well as the mix effect of reduced earnings in the Energy division.
On the upside, there was an increase in underlying NPATA by 5% to US$48 million. There was a strong operating cash flow during the period, with cash conversion of 91% of Underlying EBITDA. However, the fall in the cash conversion from 95% in CY2017 to 91% in CY2018 was the result of temporary working capital investment in the NBN project.
There was an increase in the debt from US$388 million in CY2017 to US$581 million in CY2018 ending 31 December 2018 as the company acquired the Globecomm in December 2018. The increase in debt was also the result of the payment made for the UltiSat acquisition earnout in 2018 worth US$20 million. The company declared a final dividend of A$4.8 cents (unfranked).
It was a challenging year for Speedcast International Limited. However, the company was able to deliver a robust organic growth across its Maritime, Government, and EEM divisions.
Even though the year was quite challenging for the company but still the company had made several achievements. During the period, the company had signed the two most significant contracts ever. It completed the strategic Globecomm acquisition which doubled the revenue in the high growth Government segment. The period also witnessed the establishment of shared service centre model which included the transition into a common ERP system.
Maritime:
In the Maritime segment, the companyâs revenue went up by 9.7% to US$220 million which was driven by the activation of VSAT in the Commercial Shipping, followed by the bandwidth growth as well as the customer wins in Cruise.
Energy:
In the Energy segment, the companyâs revenue went down from US$183 million in CY2017 to US$158 million in CY2018, which represents a 13.6% fall in the revenue. It was mainly impacted by the continued delays in the recovery of the offshore energy sector.
EEM:
In the EEM segment, the revenue went up by 26.8% to US$148 million in CY2018.
Government:
In the Government segment, the revenue went up by 16% to US$97 million. It was majorly driven by growth in intelligence, surveillance and reconnaissance services followed by increased spending on the US defence.
Outlook:
For CY2019, the company expects to deliver moderate organic revenue growth. The company expects its underlying EBITDA to be in range in between US$160 million to US$171 million.
In its Maritime segment, the company has a positive outlook based on the strong backlog and pipeline in Commercial Shipping. It also expects an increase in the customersâ connectivity in cruise.
The EEM segment may report a fall in the revenue during the phase 2 transition of the NBN contract. However, it will get partially balanced through the organic growth in the rest of the division.
The Government segment is expected to grow strongly in 2019 which is supposed to be slightly lower than the rate in 2018.
EBITDA is expected to be slightly diluted due to the Globecomm acquisition. Besides, Cash flow may grow in 2019 as a result of better working capital position with NBN, followed by lower cash tax payment and capex between US$50-60 million.
Stock performance
In the last six months, the stock has generated a negative return of 50.07%. However, its performance improved over last one month and the stock generated a positive return of 15.52%. By the closure of the trading session on 26 February 2019, the closing price of the stock was A$3.790, up by 13.134%. The company has a market capitalization of A$802.08 million and a PE ratio 52.34x.
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