LONDON (Reuters) - Inmarsat, the British satellite firm that agreed a $3.4 billion (£2.6 billion) private-equity takeover in March, reported a 13 percent fall in quarterly earnings, hit by weak demand from the shipping sector and a lower contribution from partner Ligado.
Shareholders will vote on the offer from a consortium of UK-based Apax Partners, U.S.-based Warburg Pincus and two Canadian pension funds on May 10.
The mobile satellite communications provider has been selling in-flight Wi-Fi to airlines through its aviation business, which cushioned some of the blow from declines in its older products.
Chief Executive Rupert Pearce said after the results on Wednesday he was taking action, including bolstering its VSAT satellite technology introduced earlier this year to stem a defection of its maritime customers from legacy products.
“The mid-market is where we have our issues,” he said in an interview. “It’s all about the extent to which we can manage our own customer base to our own VSAT products as opposed to losing them to competing VSAT products.
“We didn’t do a good job of that in 2018 ... but we began to take very aggressive action in the fourth quarter and that has led to a very rapid diminution in losses in Q1.”
Inmarsat reported earnings before interest, tax, depreciation and amortization of $152.4 million and group revenue of $346.9 million.
Higher costs also ate into Inmarsat’s profit. Total net operating costs rose to $194.5 million from $170.5 million a year earlier in the three months ended March 31.
However, the company backed its annual forecast, indicating that it was confident of its underlying performance.
On the planned takeover, Pearce said the offer recommendation was in no way defensive.
“The board believes in the long-term prospects of the company as an independent company and believes that if shareholders hold on for the medium term they could do better,” he said.
“But when you get this premium in cash in the middle of a turnaround story where we are investing a lot to create the new Inmarsat, the board rightly believed it was fair to put this in front of shareholders to consider and recommend it.”
Founded in 1979, London-based Inmarsat was set up by the International Maritime Organization. It now provides communications to ships, aircraft and remote locations worldwide.
Peace said any discussion about his own future would happen after the shareholder vote.
“I would love to continue to work at Inmarsat; a fabulous company, wonderful people and what we do is both exciting and relevant,” he said.
Reporting by Pushkala Aripaka and Muvija M in Bengaluru and Paul Sandle in London; Editing by Shounak Dasgupta/Saumyadeb Chakrabarty and Emelia Sithole-Matarise