Eutelsat Communications: Third Quarter and Nine Month 2019-20 Revenues
Revenues for the three months to 31 March 2020
Rodolphe Belmer, Chief Executive Officer, commented: "Third Quarter revenues were in line with our expectations, and confirmed the underlying improvement in Operating Verticals trends. In particular, Broadcast was highly resilient with stable revenues year-on-year and return to quarter-on-quarter growth with ongoing signs of commercial dynamism in emerging markets with a new DTH platform in Sub-Saharan Africa and the extension of a contract in the Balkans. Other commercial highlights include a solid Spring Renewal campaign with the US Government, a multi-year contract with Telenor (News - Alert) Maritime in Mobile Connectivity, and for Konnect Africa, a MoU to connect several thousand schools across the Democratic Republic of Congo.
"Faced with the unprecedented constraints of the Covid-19 crisis, our focus is on the health and well-being of our employees and ensuring business continuity for our customers at a time when demand for reliable connectivity has never been higher. Our business is resilient compared with many industries, in particular our core Broadcast vertical. As a result, we expect the impact on Full Year revenues to be limited, reflecting mainly the effects of confinement on Mobility, Professional Video and to a lesser extent Fixed Broadband. As we continue to assess the effects on future years, we do so with the confidence that our strong financial position and cash-flow generation capacity, together with our combination of resilient heritage activities and connectivity-related growth opportunities will ensure we are well positioned to withstand challenges of the current environment."
THIRD QUARTER REVENUES3
Total revenues for the Third Quarter 2019-20 stood at €322.0 million, down 4.4% year-on-year.
Revenues for the five Operating Verticals (ie, excluding 'Other Revenues') were down by 0.5% on a reported basis and by 1.6% on a like-for-like basis, excluding a positive currency effect of circa 1.1 points. There were no perimeter effects this quarter.
Quarter-on-quarter, total revenues were up by 0.9%. The revenues of the Operating Verticals were up 1.2% like-for-like.
Unless otherwise stated, all variations indicated below are on a like-for-like basis, ie, at constant currency and perimeter.
Broadcast (62% of revenues)
Third Quarter Broadcast revenues were stable at €198.8 million on a year-on-year basis. This reflected on one hand the carry-forward effect of the return of a couple of transponders in Russia in July and, on the other, higher revenues notably in MENA and at 28.5°East.
On a quarter-on-quarter basis, total Broadcast revenues rose by 2.1%, including a positive one-off for circa €1m.
At 31 March 2020 the total number of channels broadcast by Eutelsat satellites stood at 6,867, down 2% year-on-year and stable quarter-on-quarter. On a year-on-year basis, HD channels rose by 10% to 1,667, implying a penetration rate of 24.3% compared to 21.5% a year earlier.
On the commercial front, activity remained dynamic with the addition of a new platform in Sub-Saharan Africa - Ghana RCS at 7°East - as well as the renewal and expansion of business in the Western Balkans at the 16°East orbital position.
During the quarter, EUTELSAT 7C entered into service, bringing 19 incremental transponders to the African market which are expected to gradually ramp-up; elsewhere EUTELSAT 5 WEST B entered into service, replacing EUTELSAT 5 West A.
Data & Professional Video (14% of revenues)
Third Quarter Data & Professional Video revenues stood at €44.8 million, down 7.6% year-on-year. This reflected ongoing pricing pressure in a highly competitive environment. As expected, there was some improvement in trend relative to the First Half (-17.3%) on the back of improved volumes and an easing comparison basis. Occasional Use revenues, related mostly to the broadcast of live sports events, started to reflect the impact of the Covid-19 crisis during the course of March and will be more deeply affected in the Fourth Quarter.
On a quarter-on-quarter basis, revenues were stable.
Government Services (12% of revenues)
Third Quarter Government Services revenues stood at €40.0 million, down 2.4% year-on-year. They reflected on one hand the negative carry-forward effect of 2019 renewal rates (85% in Spring and 90% in Fall) and on the other the initial contribution of the EGNOS payload which entered into service on 15 February on EUTELSAT 5 WEST B.
On a quarter-on-quarter basis, revenues were up 2.3%.
The latest round of contract renewals with the US Government (Spring 2020) resulted in an estimated renewal rate of above 85% in value.
Fourth quarter revenues will benefit from the full contribution of EGNOS and from the relocation of the EUTELSAT 7A satellite.
Fixed Broadband (6% of revenues)
Third Quarter Fixed Broadband revenues stood at €18.8 million, down 2.6% year-on-year and down 2.3% quarter-on-quarter. The decline reflected yet again the absence of new capacity and a lower contribution from traditional distributors in Europe which is yet not offset by the ramp-up of the Preferred Partnership Program.
In Africa, revenues remain modest at this stage as we remain focused on trialling distribution models on a limited scale. However, an MoU was signed with Schoolap and Flash Services to provide high speed connectivity to 3,600 schools in Democratic Republic of Congo, with scope to strongly expand in coming years, highlighting the opportunity represented by government-backed digital inclusion programmes.
Mobile Connectivity (6% of revenues)
Third Quarter revenues for Mobile Connectivity stood at €20.8 million, up 2.0% year-on-year reflecting the continued ramp-up of Maritime business. The effect of the Covid-19 crisis on this application was limited to a slowdown of capacity contracts on KA-SAT in March; however, the direct and indirect impact of the shrinkage in airline and maritime traffic will be more pronounced in the Fourth Quarter.
On a quarter-on-quarter basis, revenues were down 3.5%. As a reminder, Second quarter revenues included the catch-up of a negative one-off of circa €1m which affected the First Quarter.
On the commercial front, a multi-year contract was signed with Telenor Maritime for maritime mobility services in selected sailing areas, highlighting the long-term potential of this vertical as well the quality of Eutelsat's in-orbit resources and tailor-made customer solutions.
Other Revenues amounted to -€1.1million in the Third Quarter versus €12.1 million a year earlier which included a significant one-off engineering fee. They included a -€3.3 million impact from hedging (-€5.7 million last year).
OPERATIONAL AND UTILIZED TRANSPONDERS
The number of operational 36 MHz-equivalent transponders stood at 1,377 at 31 March 2020, down by 41 units on a year-on-year basis and by 10 units quarter-on-quarter. This reflected on one hand the end of life in stable orbit of EUTELSAT 12 West B in the Fourth Quarter of last fiscal year and lower operational capacity at 5°West following the transfer of services from EUTELSAT 5 West A to EUTELSAT 5 West B in January 2020, and on the other, incremental capacity brought by EUTELSAT 7C in January 2020.
The number of utilized transponders stood at 959, stable year-on-year and down by seven units quarter-on-quarter. As a result, the fill rate stood at 69.7% at end-March 2020 compared to 67.7% a year earlier and unchanged over the quarter.
The order backlog6 stood at €4.2 billion at 31 March 2020 versus, €4.3 billion at end-December 2019 and €4.4 billion a year earlier reflecting natural backlog consumption in the absence of material Broadcast renewals. It was equivalent to 3.2 times 2018-19 revenues. Broadcast represented 67% of the backlog.
NINE MONTH REVENUES
Revenues for the first Nine Months of FY 2019-20 stood at €958.7 million, down by 3.6% on a reported basis.
Revenues of the five Operating Verticals (excluding 'Other Revenues') were down by 2.6% on a reported basis and by 3.8% like-for-like, excluding a negative perimeter effect of c.0.2 points (disposal of EUTELSAT 25B in August 2018) and a positive currency effect of c.1.4 points.
Nine months to 31 March 2020
In its order on the C-band, voted on February 28, the FCC (News - Alert) confirmed its plan to clear the frequency band 3.7-4.0 GHz in the contiguous United States (CONUS) and make it available for flexible use, including 5G, via a public auction.
The schedule for clearing the 300 MHz of C-band satellite spectrum will be concluded by December 5, 2025. Eligible satellite operators agreeing to accelerate the clearing will be required to clearing 120MHz in 46 of the top 50 Partial Economic Areas (PEAs) by December 5, 2021, and the total 300 MHz in the entire CONUS by December 5, 2023.
The total amount of above-cost 5G-related acceleration payments (in addition to the relocation costs) has been fixed to $9.7 billion and will be paid by winning bidders to the satellite operators. Within this total, Eutelsat is eligible to receive a pre-tax amount of $507m, of which $125m in the first phase and $382m in the second.
Eutelsat is confident of being able to execute the clearance within the prescribed deadlines.
Compared with many industries, our activity is resilient, characterized by long-term contracts, a substantial backlog and the criticality of our capacity for customers. This is especially true of our core Broadcast business which represents over 60% of revenues.
Nevertheless, certain verticals or sub-verticals are feeling the effects of the current crisis, particularly since mid-March. These include:
These effects, still limited in the Third Quarter, will be more pronounced in the Fourth Quarter, representing a risk to Full Year 2019-20 revenues of the order of €20 million, which is reflected in our revised revenue target.
They are likely to persist at least into the early months of next fiscal year, together with a more generalised slowdown in the pace of new business.
The updated financial outlook published on 9 April 2020 is confirmed:
As a reminder:
This outlook is based on the nominal deployment plan outlined hereunder.
The Covid-19 crisis is affecting the operations of satellite manufacturers, launchers. As a result, while the assessment of its impact on the entry into service of future satellites remains underway, the nominal deployment plan is under review. In particular, the launch of EUTELSAT QUANTUM, planned for the third quarter of calendar 2020 is likely to be delayed.
Nominal deployment plan
Changes in the fleet since 31 December 2019
As a measure of additional security in the context of the Covid-19 crisis, the Group drew €300m out of the €450m Eutelsat S.A. (News - Alert)'s revolving credit facility. Our liquidity position at the end of March, including cash and undrawn credit lines, is comfortably above € 1 billion.
Furthermore, in the context of our interest rate hedging policy, a pre-hedge instrument came to maturity resulting in a €39m one-off cash-out.
APPENDIX: QUARTERLY REVENUES BY APPLICATION
Third Quarter 2019-20 revenues conference call details
A conference call will be held on Thursday, 14 May 2020 at 18.30 CET / 17.30 GMT / 12:30 EST
To connect to the call, please use the following numbers:
Access code: 1423401#
Instant replay will be available from 14 May 2020, 22.30 CET to 21 May 2020, 22.00 CET on the following numbers:
Access code: 1423401#
The financial calendar below is provided for information purposes only. It is subject to change and will be regularly updated.
About Eutelsat Communications
Founded in 1977, Eutelsat Communications is one of the world's leading satellite operators. With a global fleet of satellites and associated ground infrastructure, Eutelsat enables clients across Video, Data, Government, Fixed and Mobile Broadband markets to communicate effectively to their customers, irrespective of their location. Around 7,000 television channels operated by leading media groups are broadcast by Eutelsat to one billion viewers equipped for DTH reception or connected to terrestrial networks. Headquartered in Paris, with offices and teleports around the globe, Eutelsat assembles 1,000 men and women from 46 countries who are dedicated to delivering the highest quality of service. Eutelsat Communications is listed on the Euronext Paris Stock Exchange (ticker: ETL).
For more about Eutelsat please visit: www.eutelsat.com
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.
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