Provider of remote communications and IT services, Speedcast International Limited (ASX: SDA) on 1 May 2019 provided the overview of the company, followed by the FY2018 highlights with the company’s outlook in the Macquarie Australia 2019 Conference Presentation.
The presentation highlighted about Speedcast AtlasTM which provides a new standard for remote communications and IT solutions. Speedcast AtlasTM customer management experience depends on the connectivity, network management along with the applications and solutions.
SDA serves in four market segments which include Maritime, Enterprise and Emerging Markets (EEM), Government and Energy.
The company also highlighted that the industry under which it belongs to is going through a major transformation phase as depicted below:
Speedcast has more than 1,500 employees, 250 local field engineers, 80 satellites, more than 40 teleports in above 140 countries. Also, from 1999 to 2012, the company was a managed connectivity service provider. From 2013 to 2018, the company functioned as a managed network service provider. From 2019 onwards, the company has transformed into a managed information service provider.
FY2018 financial snapshot
There was an increase in the Group’s revenue by 21% to US$623.1 million as compared to FY2017. EBITDA increased by 7%; however, the EBITDA margin declined to 21.2%. There was an increase in the NPATA by 5% to US$48.1 million as compared to FY2017. Out of the four divisions, three divisions: Maritime, EEM and Government division reported a growth in the revenue for the period ended on 31 December 2018. However, the Energy division reported a decline in its revenue as a result of a delay in the energy market recovery, particularly in deepwater offshore activity. Overall, Maritime division contributed 35% of the total revenue with Energy contributing up to 25%, EEM up to 24% and Government up to 16%.
The company reported a strong cash conversion of 91%. Also, as a result of temporary working capital investment in NBN around $10 million, along with higher finance cost due to Ultisat and Globecomm acquisitions, the operating cash flows declined by $11 million to $68 million.
In 2018, the company’s total CapEx was 10% of the revenue and was higher than the historical level, because of growth in investment towards stronger organic revenue growth, corporate platform investment, maintenance, as well as classification changes.
The net debt, which was $388 million in 2017, increased by the end of FY2018 reaching to $581 million.
The acquisition process of Globecomm was completed on 14 December 2018 for $134 million. Besides, the CY2018 results are in line with the expectation including the revenue of $162 million, the underlying EBITDA worth $15 million and depreciation of $9 million.
Maritime: The company expects mid to high single-digit organic revenue growth in 2019.
Energy: The company has a positive outlook for 2019 with specific tailwinds and expects a mid to high single-digit growth in 2019. The company also expects positive net activations in 2019 which includes the reduced revenue churn. There will be a stronger and more diversified pipeline along with a broader offering of new services. The revenue through systems integration is expected to be more than double this year.
EEM: The company will be transitioning into phase 2 of the NBN project. Hence, it expects a double-digit decline in the revenue in 2019, falling in the range of $20 to $25 million. Further limited churn is expected in 2019 with less significant renewals.
Government: The government sector is expected to demonstrate strong organic growth in 2019.
Overall, the company expects a stronger service revenue growth and cash generation in 2019.
The shares of SDA settled the day’s trading at A$3.870 (as on 1 May 2019), down by 0.26% as compared to its previous closing price.