The Speedcast International Ltd (ASX: SDA) share price fell around 33% in another very painful day for its shareholders after reporting its first half of 2019 result.
Speedcast International is a satellite services company with operations stretching from Brisbane around to Perth. Ships, mining companies, Government groups and other parties can use their services for communication.
Speedcast’s Painful HY19 Result
The remote data company reported that its revenue grew by 17.3% to $357.6 million. Maritime revenue increased by 12% to $119.3 million, Enterprise & Emerging Markets revenue grew by 6.8% to $79.6 million, Government revenue jumped 69.3% higher to $80.4 million and Energy revenue increased by 2.6% to $78.3 million.
Overall, management said that industry and operating challenges over the first half led to subdued organic growth, which combined with the underperformance of Globecomm, led to a disappointing financial performance.
Speedcast underlying EBITDA (click here to learn what EBITDA means), which excludes a $4.6 million impact of new lease account roles, rose 3% to $62.2 million. However, underlying net profit dropped by 30% to $14.7 million.
Statutory net profit was actually a loss of $175.5 million largely because of a $154.8 million accounting impairment relating to the performance of the non-Government operating segment.
Operating cash flow was $23.9 million, with a cash conversion rate of 36% of underlying EBITDA due to working capital deterioration and non-recurring expenses.
Speedcast Dividend And Balance Sheet
The Speedcast Board decided to not declare a dividend for the first half of 2019 and does not intend to declare a dividend for the second half either in light of the performance, the objective of reducing debt and its plan to invest in growth opportunities.
Net debt grew to $625 million after the Globecomm acquisition, its integration costs, negative working capital and the payment of the final 2018 dividend.
Speedcast Outlook
Speedcast said it still expects healthy growth in the Maritime division with commercial shipping and in cruise, with growing bandwidth. The Government segment is expected to grow with continued increase in defence spending and revenue synergies.
The company is still guiding a 2019 full year EBITDA in the range of $150 million to $160 million, including the $10 million of leasing reclassification benefit.
It’s no fun owning a share that continues to drop. At some point it should become good value, but ‘falling knives’ can be dangerous because even at today’s price it can still technically drop another 30% or 50%. I’m not sure I’d be willing to make that bet, I’d rather invest in the reliable shares in the free report below.
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