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Eutelsat Communications First Half 2017-18 ResultsRegulatory News: The Board of Directors of Eutelsat Communications (Paris:ETL) (ISIN: FR0010221234 - NYSE Euronext Paris: ETL), chaired by Dominique D'Hinnin, reviewed the financial results for the half-year ended 31 December 2017.
Commenting on the First Half, Rodolphe Belmer Chief Executive Officer of Eutelsat Communications, said: "First half results were in line with our expectations, with the decline in revenues mostly reflecting, as in the First Quarter, an unfavourable comparison basis in FY 2017. Profitability was robust, with the EBITDA margin gaining 0.5 points at constant currency to stand at 78.4%, reflecting stronger than expected delivery on the Leap cost savings plan; and we generated an 8% rise in discretionary free cash flow at constant currency, supported by highly effective capex containment. The first half also saw a solid commercial performance, notably in Video and Government services, as well as the entry into service of EUTELSAT 172B, both of which will support revenues in the Second Half. The integration of Noorsat, acquired to optimise Video distribution in the MENA region, is progressing smoothly. Looking ahead to the remainder of the year, all elements of our financial objectives are confirmed."
1 At constant currency and perimeter. KEY EVENTS
Group first half revenues stood at €696.6 million, down 5.7% at constant currency and perimeter. On a reported basis, they were down 7.7% reflecting a negative currency effect of 1.7 points and a negative perimeter effect of -0.3 points (disposal of Wins/DHI and DSAT Cinema, acquisition of Noorsat7). Excluding other revenues, revenues were down 1.8% at constant currency and perimeter. Second quarter revenues stood at €347.4 million, down 4.8% like-for-like and by 6.2% on a reported basis. Core businesses Video Applications (66% of revenues) Video Applications revenues in the first half were down 1.2% like-for-like to €449.2 million. Broadcast revenues were up 0.3% excluding the carry-forward impact of the termination of the TV d'Orange contract last year, with growth coming predominantly from MENA. Professional Video revenues continued to experience a mid-single digit decline.
4 i) Unless otherwise stated, all growth rates are
like-for-like, i.e are at constant currency and perimeter ii) the share
of each application as a percentage of total revenues is calculated
excluding "other revenues". Second quarter revenues stood at €225.9 million, flat on a quarter on quarter basis and down 1.6% year-on-year. At 31 December 2017, the total number of channels broadcast by Eutelsat satellites stood at 6,810 up 7.4% year-on-year. HD penetration continued to increase, standing at 1,275 channels versus 997 a year earlier (+28%), implying a penetration rate of 18.7% compared to 15.7% a year earlier. On the commercial front a major contract was renewed with Cyfrowy Polsat at the HOTBIRD position as well as with the distributor, Globecast. A capacity contract was signed at the 5° West orbital position with SFR-Altice for the distribution of some 20 channels. Multi-year agreements were signed for new DTH platforms in several emerging broadcast markets, including Fiji on EUTELSAT 172B and the Caribbean region on EUTELSAT 117 WEST B. Elsewhere, the Group took steps to streamline Video distribution in MENA with the absorption of Noorsat, its largest reseller in the region. The integration of Noorsat is progressing smoothly. Fixed Data (11% of revenues) In the first half, Fixed Data revenues stood at €73.4 million, down 10.6% like-for-like. Second quarter revenues stood at €36.3 million, down 9.4% on a year-on-year basis, and by 2.9% quarter-on-quarter. The performance of this vertical continues to reflect ongoing pricing pressure in all geographies. Government Services (12% of revenues) In the first half, Government Services revenues stood at €80.7 million, stable like-for-like, reflecting solid levels of renewals with the US Department of Defence in the last 12 months. Second quarter revenues stood at €39.6 million, down 1.2% on a year-on-year basis, but up by 0.4% quarter-on-quarter. Following the entry into service of EUTELSAT 172B, EUTELSAT 172A was relocated to the 174° East position enabling it to secure incremental business in coverage of Asia-Pacific and to pursue other potential opportunities. Elsewhere, Eutelsat signed a multi-transponder agreement with the Colombian Ministry of Defence for capacity on the EUTELSAT 115 West B satellite. Connectivity Fixed Broadband (6% of revenues) In the first half, Fixed Broadband revenues stood at €44.1 million, down 8.1% like-for-like, partly reflecting the absence of a positive one-off booked in the first quarter last year related to the phasing of payments by a specific customer as well as a slight underlying decline in European consumer Broadband. Second quarter revenues stood at €21.8 million, down 6.5 % year-on-year and down by 1.7% quarter-on-quarter. Revenue trends are expected to improve in the second half now that the retail joint-venture with ViaSat is up and running. The first offers have been launched in Norway and Poland in December, and in Sweden and Finland in January. Mobile Connectivity (5% of revenues) In the first half, Mobile Connectivity revenues stood at €37.1 million, up 20.6% like-for-like, reflecting the effect of the Taqnia contract signed last year as well as continued growth on wide-beam capacity notably over the Americas and at 172° East. Second quarter revenues stood at €18.5 million, up 10.1% on a year-on-year basis, and 0.8% quarter-on-quarter. EUTELSAT 172B started to operate end-November with the HTS payload now fully sold to Panasonic and China Unicom as well as incremental wide-beam capacity sold for in-flight Mobility. Other Revenues Other revenues amounted to €12.2 million in the first half, of which €5.4 million in the second quarter. This compares with the exceptionally high level of €41.6 million in H1 2016-17 which included fees in respect of technical and engineering services, termination fees related to the rationalisation of the distribution at HOTBIRD as well as revenues related to the agreements with SES at 28.5° East which ended on 31 December 2016. OPERATIONAL AND LEASED TRANSPONDERS The number of operational transponders at 31 December 2017 rose by 90 to 1,416 year-on-year, mainly due to the entry into service of EUTELSAT 117 West B and EUTELSAT 172B. The fill rate stood at 67.0% compared to 70.9% a year earlier, reflecting mainly the impact of this new capacity. An incremental 18 transponders have been leased since end-June '17 reflecting notably new business in Government Services at 174° East and in Mobile Connectivity.
Note: Based on 36 MHz-equivalent transponders excluding high throughput capacity (KA-SAT satellite, Ka-band HTS payloads on EUTELSAT 3B, EUTELSAT 65 West A, EUTELSAT 36C and leased on Al-Yah 2, Ku-band HTS payload on EUTELSAT 172B). ORDER BACKLOG The order backlog10 stood at €4.7 billion at 31 December 2017 versus 5.2 billion at end June, mainly reflecting the impact of the integration of Noorsat (-€0.4 billion).11 The backlog was equivalent to 3.2 times 2016-17 revenues. Video Applications represented 85% of the backlog.
PROFITABILITY EBITDA amounted to €545 million at 31 December 2017 compared with €588 million a year earlier, down 7.4%. The EBITDA margin stood at 78.2% (78.4% at constant currency), an improvement compared to last year (77.9%) thanks to the impact of the "LEAP" cost saving plan and in spite of the much lower level of 'Other revenues' which no associated costs. As usual the H1 margin is not representative of the full-year due the favourable phasing of certain operating costs. Group share of net income stood at €157 million versus €192 million a year earlier, a 18.6% decrease, and represented a margin of 22.5%. This reflected:
8 Number of transponders on satellites in stable orbit,
back-up capacity excluded. CASH FLOW Net cash flow from operating activities amounted to €412 million versus €482 million in H1 2016-17. This reflected mainly the lower EBITDA, and to a lesser extent slightly more unfavourable impact from working capital requirement and higher tax paid, reflecting the timing of tax payments. Cash Capex amounted to €53 million, down from €130 million a year earlier, reflecting the phasing of various satellite programmes. This amount is not representative of the anticipated full year level. Interest and other fees paid net of interest received amounted to €21 million compared to €27 million last year, reflecting lower interest related to financial leases. As a result, Discretionary Cash-Flow amounted to €339 million, up 4.3% on a reported basis and by 8.1% at constant currency. FINANCIAL STRUCTURE At 31 December 2017, net debt was broadly unchanged at €3,630 million, versus €3,641 million at 30 June 2017. Discretionary free cash-flow largely covered the dividend payment (€295 million including dividends paid to minority interests). Equity investments (acquisition of Noorsat and of minority interests in Broadband for Africa) generated a cash outflow of €89 million, while the foreign exchange portion of the cross-currency swap - which is included in Net Debt - decreased by €32 million. Other items mainly related to repayments of export credit financings and financial leases contributed to the reduction of net debt for an amount of €24 million. The net debt to EBITDA ratio stood at 3.3 times, a slight improvement on end-December 2016 (3.4 times). The weighted average maturity of the Group's debt stood at 2.5 years, compared to 2.9 years at end-December 2016. The average cost of debt after hedging was 2.9% (3.1% in H1 2016-17). Liquidity remained strong, with undrawn credit lines of €650 million and cash of €360 million. DIVIDEND The Annual General Meeting of Shareholders held on 8 November 2017 approved the payment of a dividend of €1.21 per share in respect of the financial year ended 30 June 2017, up from €1.10 the previous year. The dividend, totaling €281 million, was fully paid in cash on 23 November 2017. FINANCIAL OUTLOOK Based on the performance of the First Half, the group confirms the financial objectives communicated on 28 October 2017.
12 For fiscal year 2016-17, revenues on the basis of
perimeter as of 30 June 2017 stood at €1,472 million (excluding revenues
from Wins/DHI and DSAT Cinema which were sold during fiscal year
2016-17). This outlook is based on the nominal deployment plan hereunder. FLEET DEPLOYMENT Nominal deployment programme
Al Yah 3 satellite, on which Eutelsat is leasing capacity for its Konnect Africa project, was launched on 25 January 2018. The mission experienced some challenges during the launch stages which resulted in the Al Yah 3 satellite being inserted into an orbit that differed from the flight plan. Thereafter, the satellite was successfully acquired by Yahsat and the satellite is healthy and operating nominally. A revised flight plan will be executed in order to achieve the operational orbit and fulfil the original mission. Changes in the fleet
CORPORATE GOVERNANCE The Ordinary and Extraordinary Shareholders' Meeting of Eutelsat Communications of 8 November 2017 approved the appointment of four new directors: Dominique D'Hinnin, Paul-François Fournier, Esther Gaide and Didier Leroy. Dominique D'Hinnin was subsequently appointed as chairman succeeding Michel de Rosen. The Board is now made up of twelve members, 42% of whom are women (five out of twelve) and 67% of whom are independent directors (eight out of twelve). The Combined General Meeting also approved all the other resolutions, including the approval of the accounts, the dividend for the 2016-17 Financial Year, (€1.21 per share, paid on 23 November 2017), executive compensation and financial resolutions. BUSINESS PORTFOLIO On 14 July 2017, Eutelsat repurchased the minority interests held by Inframed in Broadband for Africa. On 12 October, Eutelsat acquired Noorsat, one of the leading satellite service providers in the Middle East, from Bahrain's Orbit Holding Group. ******* First Half 2017-18 results conference call and webcast A conference call will be held on Friday, 16 February 2018 at 9:00am CET To connect to the call, please use the following numbers:
Access code: 3857717# The presentation will also be available via webcast on our website at http://www.eutelsat.com/en/investors.html Recording available from 16 February 1:00pm to 23 February, 1.00pm CET
Access code: 3857717# Documentation Consolidated accounts are available at www.eutelsat.com/investors/index.html 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. APPENDICES Appendix 1: Additional financial data Extract from the consolidated income statement (in € millions)
Net debt to EBITDA ratio
Change in net debt (€ millions)
Appendix 2: quarterly revenues by application Reported revenues The table below shows quarterly reported revenues. Q1 2016-17 revenues are restated under the new classifications used since H1 2016-17 results.
Proforma revenues The table below shows quarterly proforma revenues for FY 2016-17 excluding revenues from Wins / DHI and DSAT Cinema:
Appendix 3: Alternative performance indicators In addition to the data published in its accounts, the Group communicates on three alternative performance indicators which it deems relevant for measuring its financial performance: EBITDA, cash capex and Discretionary free cash flow (DFCF). These indicators are the object of reconciliation with the consolidated accounts. EBITDA, EBITDA margin and Net debt / EBITDA ratio EBITDA reflects the profitability of the Group before Interest, Tax, Depreciation and Amortization. It is a key indicator in the Fixed Satellite Services Sector. The table below shows the calculation of EBITDA based on the consolidated P&L accounts for H1 2016-17 and H1 2017-18:
The EBITDA margin is the ratio of EBITDA to revenues. It is computed as follows:
At constant currency, the EBITDA margin stood at 78.4% as of 31 December 2017. The Net debt / EBITDA ratio is the ratio of net debt to last-twelve months EBITDA. It is computed as follows:
Cash Capex The Group on occasion operates capacity within the framework of financial leases, or finances all or part of certain satellite programs under export credit agreements, leading to outflows which are not reflected in the item "acquisition of satellites and other tangible or intangible assets". Cash Capex including these two elements is published in order to reflect the totality of Capital Expenditures undertaken in any financial year. Cash Capex therefore covers the acquisition of satellites and other tangible or intangible assets as well as payments in respect of export credit facilities and long term financial leases on third party capacity. Cash Capex for H1 2016-17 was restated from the value of the payment owed in 2015-16 to RSCC in respect of lease of EUTELSAT 36C but paid effectively in H1 2016-1717 (€87.2m) which was already accounted for in 2015-16 cash capex. 16 Net debt includes all bank debt, bonds and all liabilities from long-term lease agreements and Export Credit Agencies as well as Forex portion of the cross-currency swap, less cash and cash equivalents (net of bank overdraft). Net Debt calculation is available in the Note 14 of the appendices to the financial accounts. The table below shows the calculation of Cash Capex for H1 2016-17 and 2017-18:
Discretionary free cash flow (DFCF) The Group communicates on Discretionary free cash flow which reflects its ability to generate cash after the payment of interest and taxes. DFCF generally and principally serves the dividend payment and debt reduction. Discretionary free cash flow is defined as Net cash flow from operating activities less Cash Capex as well as interest and other financial costs, net of interest income. The table below shows the calculation of Discretionary free cash flow for H1 2016-17 and 2017-18 and its reconciliation with the cash flow statement:
At constant currency, the Discretionary Free-Cash Flow would have amounted to €351.4m as of 31 December 2017.
17 In FY 2015-16 the payment was frozen in the context of the
legal action brought against the Russian State by former Yukos
shareholders. View source version on businesswire.com: http://www.businesswire.com/news/home/20180215006269/en/ |
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