Publicly listed satellite telecommunications service provider Speedcast International has expressed disappointment in its FY19 first half-year performance as it sets to iron out challenges with its Globecomm acquisition.
Speedcast acquired Globecomm for $US135 million in December, noting it was a good strategic opportunity at the time, but has proved to be challenging and time-consuming, chairman John Mackay, told shareholders.
He pointed out a decline in Globecomm’s maritime business and delays to government projects in the pipeline as the top line concerns.
The company expects underlying EBITDA for the full year to sit between US$140 million to US$150 million, a decrease from its previous forecast in May of US$160 million to US$171 million.
“Globecomm was on a decline trajectory when we acquired the company and our efforts have been centred around integrating it as quickly as possible in order to stabilise revenue by leveraging Speedcast strengths. We are hopeful that we will start seeing the results of the integration work in 2020,” Mackay said.
Since the start of the year, Speedcast has also been implementing organisational changes and launching several improvement programs that aim to deliver benefits in the next six to 12 months. It is targeting US$20 million in annual savings across operating and cost of sale expenses.
As part of this, the company has undertaken enhancements to its IT systems and processes implementing a common ERP system, which help to provide a better forecast for shareholders and make decisions faster.
“Several investors have asked questions about management’s level of visibility on the business and the ability to forecast accurately. We fully understand this concern,” Mackay said. “The company has always aimed to forecast its outlook in a balanced way and to update investors and the market immediately when things change.
"Larger contracts, which Speedcast has an increasing share, can sometimes have a short term negative impact on forecasts due to their execution complexity but create significant value in the long term.”
Mackay explained challenging market conditions have made it difficult for the company to achieve organic growth, but said its priority was to focus on its four divisions.
In addition it will invest in product development and innovative solutions and upsell applications to existing customers, while expanding its reach through a larger channel partner network.
Furthermore Mackay said Speedcast could help organisations to collect, transport and analyse data flow particularly in government, maritime and energy sectors.
“Over the past few months we have reviewed opportunities to reduce our cost structure and more efficient growth machine,” he said.
Earlier this month Speedcast was named as one of many companies selected to take part in a US$3 billion five-year deal with the US Department of Homeland Security as part of the Tactical Communications Equipment and Services II contract, but had to clarify that being part of the contract, didn’t guarantee any level of revenue to the company.