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Eutelsat Communications: Q1 2016-17 RevenuesRegulatory News: Eutelsat Communications (Paris:ETL) (ISIN: FR0010221234 - Euronext Paris: ETL) today reported revenues for the first quarter ended 30 September 2016. Three months to 30 September 2016
Commenting on the First Quarter, Rodolphe Belmer, CEO, said: "First quarter revenues were fully in line with our expectations, and we are on track to meet our objectives for the full year. We have made a number of important steps along our new strategic roadmap, notably the procurement of the EUTELSAT 5 West B satellite under the 'design-to-cost' policy, generating significant capex savings, as well as progress on non-core asset disposals with Hispasat and Wins. On the operational side, I would highlight the rapid execution of the rationalization of distribution at the HOTBIRD orbital position and the strong renewal rate with the US Department of Defense during the Fall round, confirming the stabilisation in Government Services. In connectivity, we have seen a number of positive developments including the launch of the Russian broadband service on EUTELSAT 36C, the securing of capacity enabling us to launch our African broadband initiative with limited delay despite the loss of the Ka payload on AMOS (News - Alert)-6 satellite, and the signing of several contracts for in-flight connectivity highlighting the quality of our in-orbit resources. We are focused on optimising the revenue potential of our existing assets and maximising discretionary free-cash-flow generation, and we are working on additional measures to this end, notably operating cost savings, with the objective of reducing leverage, investing selectively in future growth opportunities and delivering an attractive shareholder remuneration " RECENT HIGHLIGHTS Since the beginning of the current financial year, progress has been made on several key components of the new strategic roadmap communicated on 27 June 2016. Financial:
Operational:
FIRST QUARTER REVENUE ANALYSIS2 Total revenues for the First Quarter ending 30 September 2016 stood at €384.8 million, up 0.7% like-for-like. On a reported basis, revenues were down 0.7% reflecting a 1.2 point negative perimeter effect (disposal of Alterna'TV and Wins/DHI3) and a 0.3 point negative currency effect (depreciation of the dollar relative to the euro). VIDEO APPLICATIONS (63% of revenues) First quarter revenues for Video Applications amounted to €224.3 million, down 1.3% like-for-like. This reflected on one hand additional revenues generated by incremental capacity launched last year (EUTELSAT 8 West B in MENA and EUTELSAT 36C in Sub-Saharan Africa) and, on the other, lower revenues at the HOTBIRD position mainly related to the rationalisation of empty capacity in the hands of resellers, as well as lower revenues in professional Video. At 30 September 2016, the total number of channels broadcast on the Eutelsat fleet stood at 6,336, up 8.2% year-on-year. HD penetration continued to grow, at 940 channels, up from 721 a year earlier and representing 14.8% of total channel-count compared to 12.3%. DATA SERVICES (16% of revenues) First quarter revenues for Data Services stood at €56.8 million, down by 2.8% like-for-like. This reflected on one hand the full-quarter contribution of the Ka-band payload on EUTELSAT 65 West A which entered into service in May, and on the other, the early termination of the contract for Ka-band capacity on EUTELSAT 3B in December 2015 as well as the ongoing tough environment for this application in all geographies. VALUE-ADDED SERVICES (8% of revenues) First quarter revenues for Value-Added Services amounted to €29.4 million, up 8.3% like-for-like, reflecting mainly a positive one-off related notably to the phasing of payments by a specific customer. The number of subscribers on KA-SAT stood at 179,000 compared to 181,000 at end-June and 190,000 a year earlier. ARPU trends remained well oriented. The Russian consumer broadband service was launched on the EUTELSAT 36C satellite in July, and a distribution agreement has been secured with Tricolor TV. On 1st September, Spacecom's AMOS-6 satellite was lost following a launch pad explosion. Eutelsat had contracted a multi-year agreement to lease the satellite's Ka-band payload covering Sub-Saharan Africa, with a view to launching broadband services from early 2017. The unmitigated impact on revenues was estimated at around €5 million in FY 2016-17, €15 million in FY 2017-18 and €25-30 million in FY 2018-19. On 27 October, Eutelsat concluded a deal with Yahsat to lease ka-band capacity. In consequence, the African Broadband initiative will be rolled out during the first four months of calendar 2017 with only a slight delay relative to the original timetable and enable Eutelsat to revert fully to the original business plan in FY 2017-18 and FY 2018-19. In Mobility, SAS and Finnair will use capacity on the KA-SAT satellite to connect their short and medium-haul fleets in the context of a commercial agreement with ViaSat (News - Alert). GOVERNMENT SERVICES (13% of revenues)
First quarter revenues for Government Services stood at
€47.1 million, a decline of 10.7% year-on-year, reflecting the effect of
lower renewals in the previous fiscal year. OTHER AND NON-RECURRING REVENUES
Other revenues4 amounted to €27.1
million in the First Quarter compared with €16.7 million last year. In
addition to the revenues related to the agreements with SES (News - Alert) at 28.5°
East, they included anticipated fees in respect of technical and
engineering services provided to a third party operator and termination
fees related to the rationalisation of the distribution at HOTBIRD. OPERATIONAL AND LEASED TRANSPONDERS
The number of operational 36 MHz-equivalent transponders stood at 1,327
at 30 September 2016, almost unchanged compared to 30 June 2016.
Year-on-year they rose by 152 units, reflecting mainly the entry into
service of EUTELSAT 8 West B, EUTELSAT 115 West B, EUTELSAT 36C,
EUTELSAT 9B and EUTELSAT 65 West A.
Note: Based on 36 MHz-equivalent transponders excluding high throughput capacity (KA-SAT 82 spotbeams, EUTELSAT 3B 5 Ka-band spotbeams, EUTELSAT 65 West A 24 Ka-band spotbeams and EUTELSAT 36C 18 Ka-band spotbeams). ORDER BACKLOG The order backlog7 stood at €5.4 billion at 30 September 2016, versus €6.0 billion a year earlier and €5.6 billion at end June 2016. The sequential decline in backlog reflected natural consumption. The backlog was equivalent to 3.6 times 2015-2016 revenues. Video Applications represented 85% of the backlog.
FINANCIAL OBJECTIVES Based on the performance of the First Quarter, all financial objectives published on 29 July 2016 are confirmed. Revenues for FY 2016-17 (at constant currency and perimeter, excluding non-recurring revenues) are expected in the range of -3% to -1%. In FY 2017-18 they are expected broadly flat with a return to modest growth in FY 2018-19. For each of FY 2016-17, FY 2017-18 and FY 2018-19 the EBITDA margin is expected to remain above 75%. Cash Capex will stand at an average of €420 million8 per annum for the period July 2016 to June 2019. Discretionary Free Cash Flow9 is expected to see three-year CAGR in excess of 10%, with FY 2015-16 as the base year10. The Group is committed to maintaining a sound financial structure to support its investment grade credit rating and aims at a net debt / EBITDA ratio below 3.3x. It also commits to serving a stable to progressive dividend to shareholders. FLEET DEVELOPMENTS PROCUREMENTS SINCE 30 JUNE 2016 In October 2016, the EUTELSAT 5 West B satellite was procured to replace the EUTELSAT 5 West A satellite at the 5° West orbital position. It is expected to be launched in calendar year 2018. NOMINAL LAUNCH PROGRAMME The upcoming launch schedule is indicated below. Aside from the new satellite mentioned above, there are no changes compared to July 2016.
CHANGES IN THE FLEET
CORPORATE GOVERNANCE The Board of 28 July 2016 called on the shareholders present at the Annual General Meeting of 4 November 2016 to vote notably on the following resolutions:
APPENDICES Quarterly reported revenues by business application
Proforma revenues by business Application The table below shows proforma revenues for fiscal year 2015-16 reflecting the disposals of Alterna'TV deconsolidated from April 2016, Wins/DHI from September 2016, and DSAT Cinema12 from November 2016.
First quarter 2016-17 revenues conference call A conference call will be held on Thursday, 27 October 2016 at 6:30pm CET / 5.30pm GMT / 12:30 EST To connect to the call, please use the following numbers:
Access code: 8718111# Instant replay number will be available from 27 October, 09.30pm to November 4, 09:30pm CET:
Financial calendar The financial calendar below is provided for information purposes only. It is subject to change and will be regularly updated.
Disclaimer The forward-looking statements included herein are for illustrative purposes only and are based on management's current views and assumptions. Such forward-looking statements involve known and unknown risks. For illustrative purposes only, such risks include but are not limited to: postponement of any ground or in-orbit investments and launches including but not limited to delays of future launches of satellites; impact of financial crisis on customers and suppliers; trends in Fixed Satellite Services markets; development of Digital Terrestrial Television and High Definition television; development of satellite broadband services; Eutelsat Communications' ability to develop and market Value-Added Services and meet market demand; the effects of competing technologies developed and expected intense competition generally in its main markets; profitability of its expansion strategy; partial or total loss of a satellite at launch or in-orbit; supply conditions of satellites and launch systems; satellite or third-party launch failures affecting launch schedules of future satellites; litigation; ability to establish and maintain strategic relationships in its major businesses; and the effect of future acquisitions and investments. Eutelsat Communications expressly disclaims any obligation or undertaking to update or revise any projections, forecasts or estimates contained in this presentation to reflect any change in events, conditions, assumptions or circumstances on which any such statements are based, unless so required by applicable law.
1 At constant currency and perimeter and excluding
non-recurring revenues. For more details, please refer to the appendices.
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