Satellite groups no longer UK’s sleeping giants
UK-EU dispute over Galileo and approach for Inmarsat sharpen focus on sector
Satellites were once the sleeping giant of UK technology. But the debate around the €10bn Galileo navigation system, focus of a bitter dispute between London and Brussels over post-Brexit access to the EU’s military-grade service, has thrown the industry into the limelight.
The approach for Inmarsat, Britain’s largest satellite company, by cash-rich US rival EchoStar has sharpened the focus on the sector.
Analysts argue that Inmarsat should hold out for a significantly higher offer but if EchoStar does bring the London-based company into its orbit there will only be a handful of choices left for investors looking to tap into the satellite industry.
Avanti Communications
Avanti was up for sale in 2016 as it grappled with indebtedness. But this year it went down the debt-for-equity route instead after warning shareholders the stock could be worthless if they did not agree to a balance sheet restructuring.
The company hopes the days of regular warnings on the parlous state of its finances may be behind it. With a new chief executive — Kyle Whitehill, who joined from Africa’s Liquid Telecom, having spent 15 years at Vodafone — it hopes to finally deliver on its promise. That could involve a new plan to target the Latin American market, say people with direct knowledge of the company’s strategy.
Its prospects were given a boost last month when an arbitrator said the Indonesian government would have to pay it $20m over a contract dispute. The decision was welcome given the company’s last trading statement, covering the nine months to March 2018, showed its losses before interest, taxation, depreciation and amortisation widening from $11.4m to $18m, with revenue dropping by almost a third to $31.3m. But the company will need to show revenue progress if it is to drag itself out of the mire.
Bigblu Broadband
Satellite Solutions Worldwide, backed by property developer Nick Candy, has spent most of its existence mopping up tiny telecoms companies as it looks to build a specialist capable of connecting the 5 per cent of homes that fibre networks will never reach. In May it rebranded itself as Bigblu Broadband to bring the 20 companies it has bought across nine countries under one name.
It is inevitable that such a buying spree will add assets of little interest to the core business. Bigblu said only 82 per cent of its 100,000 or so customers were connected via satellite. It has now sold off a large portion of the non-satellite rump with a A$1.5m (US$1.1m) deal to sell 11,000 Australian customers connected to the NBN network to rival Superloop. Full-fibre fans should note that Bigblu argued that those fibre users, which it picked up after buying SkyMesh in 2016, contributed “minimal ebitda to the group”, with margins well below that it achieves in satellite.
Christopher Mills, the activist investor behind Harwood Capital Management, was appointed to the board in May after building a stake, and is seen to be expecting big things from Bigblu.
Mercia Technologies
Launching satellites is an expensive business fraught with risk. Their success depends on filling the bandwidth with something people want to use, whether it is television delivered to a dish on a house or GPS signals to a smartphone.
The government has been trying to foster an industry of niche satellite services for a number of years and finance is starting to emerge. Leeds-based SatSense just raised £750,000 from NPIF-Mercia Equity Finance, part of the Northern Powerhouse Investment Fund, to develop its app that can detect subsidence down to the millimetre.
Mercia Technologies is a fund based near Warwick that hopes to spot companies that have missed out on the ample capital pouring into the London and Cambridge tech clusters. Although SatSense has already been backed by one of its funds it is exactly the sort of company Mercia is hoping to unearth and it says it could be the subject of a direct investment in the future.
Mercia, which was backed by prominent fund manager Neil Woodford when it floated, has not been a shining star on the market. However, its results for the six months to December showed the fair value of its portfolio rising 24 per cent to £65m, revenue rising 65 per cent to £5m and a post-tax profit of £1.4m. With £55m of cash available, Mercia looks secure.