The Speedcast International Ltd (ASX: SDA) share price is getting whacked following the release of a profit downgrade. At the time of writing the shares are down a huge 38%. Yikes!

About Speedcast

Speedcast is the largest provider of remote communications and IT services in the world, delivered via a network of 70 plus satellites and bolstered by extensive on the ground local support from 40-plus countries. They serve more than 2,000 customers in over 140 countries in sectors including  Maritime, Energy, Mining, Enterprise, Media, Cruise and government.

What Did Speedcast Say?

As far as ASX announcements go, this was not a good one for shareholders, that’s for sure.

In the announcement, Speedcast provided an update to earnings expectations for both the half and full year. They have a 31 December year end. Speedcast said they expect to achieve EBITDA of US$60 to US$64 million for the first half of 2019.

For its full-year 2019, Speedcast now expect to achieve EBITDA of US$140 to US$150 million. Management had previously guided for US$160 to US$171 million. Using the midpoints of these numbers, it looks like EBITDA will be US$20 million lower than the previous forecast, or around 12%.

Why The Downgrade?

Management noted key factors impacting earnings were weaker market conditions, some delays to expected revenue, increased churn from a major contract, continued technical difficulties with their Carnival cruise ship contract, lower than expected earnings from their Globecomm acquisition made late last year… the list goes on…

Speedcast state these factors as all being non-structural and also “remain excited about the growth potential in the Globecomm business“. Moreover, they are “highly confident they can achieve revised full year guidance for 2019”, even though it “implies a larger increase to Underlying EBITDA from 1H to 2H than seen in previous years.”

Further, “over the medium term, Speedcast continues to expect healthy growth in Maritime – both in commercial shipping once this year’s churn event is digested, and in Cruise where bandwidth needs continue to grow, and also in Government – with continued increase in defense spending and revenue synergies from the Globecomm integration expected in 2020 and beyond”.

What Now For Shareholders?

It has been a downward spiral for Speedcast shareholders since the share price peaked at $6.84 in August 2018. The shares are currently $2.14, down almost 70% from their high. There’s a lot for shareholders to read in today’s announcement and it seems like a lot is going on inside the Speedcast business.

At the end of 2019 net leverage is expected to be above the previously communicated target of 3x to 3.2x times but within the debt facilities covenants. Personally, I prefer investing in companies that have little or no debt and therefore this one is not for me.

Finding ASX shares offering exceptional long term growth and dividends over 3% is rare. Fortunately, the Rask Group's top expert investment analyst has released a FREE investing report which reveals proven ASX shares. These three companies have proven themselves to be reliable dividend + growth shares over a decade. Click here to get instant access to his report. Past performance is not indicative of future performance but as he says in his report, there are many reasons to keep a close watch on these 3 shares in 2019 and beyond. Absolutely no credit card details or payment required.
Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclosure: At the time if writing David does not have a financial interest in any of the companies mentioned.