Speedcast International Reports $304-M Six Months Revenue; Signs Agreement to Acquire Globecomm
Sydney, Australia, Aug. 28, 2018 — Remote communication and IT solutions provider Speedcast International Limited (ASX: SDA) today announced its financial results for the six-month period ended 30 June 2018 (1H 2018), with group revenues of US$304.9 million, a 24% period-on-period increase.
Speedcast said its EBITDA grew 14% to US$60.4 million (1H 2017: US$53.2 million) with the Board declaring a fully franked interim dividend of AU$2.40 cents per share for the six-month period ended 30 June 2018
The company also reported strong operating cash flows (89% of Underlying EBITDA) generated as a result of improved working capital discipline while its net debt increased from US$388 million at 31 December 2017 to US$430 million at 30 June 2018 as a result of investment in growth including debt refinancing costs.
"We are pleased with the organic growth we achieved in the first half of 2018 across Maritime, Government, and EEM. Disappointingly, the Energy sector suffered from delays in the market recovery, but we remain bullish about our ability to significantly benefit from the Energy sector's recovery, which we believe will be stronger than previously forecasted. We have a diversified business and will continue to invest in market segments where we are confident we can deliver strong organic growth," said Pierre-Jean Beylier, CEO of Speedcast.
Speedcast attributed its strong cash flow from maritime division revenue which grew 10% to US$106 million in 1H 2018 from US$97 million in 1H 2017. This strong organic increase was driven primarily by high growth in Commercial Shipping from increased VSAT activations and some bandwidth growth in Cruise.
But energy division revenue in 1H 2018 was down 17% to US$76 million from US$92 million in 1H 2017 due to the delayed recovery in the Offshore Energy sector, which caused higher than expected industry churn (rig count attrition) and pricing pressure, delays in certain projects, and one time customer effects.
The company expects underlying EBITDA for the full year 2018 to be in the range of US$135 million to US$145 million.
Speedcast also announced that it has entered into a definitive agreement to acquire Globecomm Systems Inc. from affiliates of HPS Investment Partners, LLC and Tennenbaum Capital Partners, LLC for an estimated net purchase consideration of US$135 million1, on a cash & debt free basis.
The acquisition, which is expected to close in Q4 2018, strengthens Speedcast's global position in Government, Maritime and Enterprise and it strongly complements last year's acquisition of UltiSat. This will double Speedcast's revenue in Government, and add more scale, visibility and capabilities in this strategic growth market.
Speedcast estimates it will generate over US$15 million in annual cost synergies within 18 months after the acquisition.
The acquisition will be funded by a fully underwritten US$175 million add-on to Speedcast's existing 7‐year senior secured credit facility (due 2025) from the US institutional term loan market. This will also be used to repay a portion of Speedcast's Revolving Credit Facility and enhance Speedcast's liquidity and cash reserves
"The acquisition of Globecomm is fully in line with our strategy to consolidate our market and thus build competitive advantages based on scale and capabilities. Globecomm is particularly complementary to UltiSat as it strengthens Speedcast's position serving Government customers at a time when government spending globally is expected to rise," Beylier said.
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