Eutelsat Communications: First Quarter 2019-20 Revenues
PARIS--(BUSINESS WIRE)--Oct 30, 2019--
Eutelsat Communications (Paris:ETL) (ISIN: FR0010221234 - Euronext Paris: ETL) reports revenues for the First Quarter ended 30 September 2019.
In € millions
Data & Professional Video
Total Operating Verticals
Other Revenues 2
EUR/USD exchange rate
Reminder: Eutelsat has adjusted its reporting basis to better reflect the differing trends in its operating verticals. Broadcast is now reported on a standalone basis. Professional Video and Fixed Data are regrouped into a new category, “Data & Professional Video”.
Rodolphe Belmer, Chief Executive Officer, commented: “The first Quarter has seen a number of milestones in our Connectivity strategy, with the procurement of EUTELSAT 10B with significant pre-commitments in the mobility segment and the foundations laid for the IoT strategy, notably with the order of our first ELO constellation nanosatellites. Elsewhere, we have added a further lever to our cash flow strategy with the roll-out of the LEAP 2 cost-savings plan, aiming to generate opex economies of €20-25 million by FY 2021-22, which will be reinvested in our future growth verticals whilst preserving our EBITDA margin.
Despite our expectation that the revenues profile for the current year will be back-end loaded, the outturn of the First Quarter is slightly below our expectations, notably due to worsening trends in Data & Professional Video and the unplanned return of a couple of transponders in Russia. On the other hand, the coming quarters will benefit from easing comps in Government Services and Data & Professional Video, the contribution of new capacity and the ramp-up of African Broadband.
We therefore confirm our Full Year objective of revenues for the Operating Verticals of between €1,280 million and €1,320 million, albeit with an increased likelihood of a landing in the lower half of this range. All other elements of the financial outlook are also reiterated. These objectives are subject to a nominal deployment plan, and notably the outcome of tests on the condition of the EUTELSAT 5 West B satellite.”
FIRST QUARTER REVENUES 4
Total revenues for the First Quarter stood at €317.6 million down 5.2% on a reported basis and by 6.0% like-for-like.
Revenues of the five Operating Verticals (ie, excluding ‘Other Revenues’) stood at €316.5 million. They were down by 6.2% on a like-for-like basis excluding a negative perimeter effect of c.0.5 points (disposal of the stake in EUTELSAT 25B in August 2019) and a positive currency effect of c. 1.5 points. Quarter-on-quarter, revenues of the five Operating Verticals were down by 3.7% like-for-like.
Unless otherwise stated, all variations indicated hereunder are on a like-for-like basis, (ie, at constant currency and perimeter).
Broadcast (62% of revenues)
First Quarter revenues amounted to €194.7 million, down 1.7% year-on-year. This reflected notably the termination of a contract in Sub-Saharan Africa and the temporary effect of the return of a couple of transponders in Russia. None of these elements alter our view of Broadcast as a fundamentally resilient business.
On a quarter-on-quarter basis, revenues were down by 2.0%.
At 30 September 2019, the total number of channels broadcast by Eutelsat satellites stood at 6,976, down 0.3% year-on-year. The number of HD channels stood at 1,582 versus 1,419 a year earlier, up by 11.5% and represented 22.7% of channels compared to 20.3% a year earlier.
On the commercial front, two multi-year, multi-transponder contracts were signed with Orby TV for capacity on EUTELSAT 117 West A for the launch of a new DTH service across the United States, and with Ultra DTH for capacity on EUTELSAT 65 West A to support the deployment of a white-label DTH platform across the Caribbean and Andean regions.
Broadcast revenues should benefit from the entry into service of EUTELSAT 7C at the end of calendar year 2019, bringing incremental capacity (19 36-Mhz equivalent transponders) to the African broadcast market.
Data & Professional Video (14% of revenues)
First Quarter revenues stood at €43.0 million, down by 19.6% year-on-year. They continued to reflect the ongoing pricing pressure and highly competitive environment in this application, and were also affected by volume losses in Data in Latin America and lower occasional use in Professional Video.
Quarter-on-quarter, revenues were down by 11.8%.
Government Services (12% of revenues)
First Quarter revenues stood at €39.3 million, down 10.7% year-on-year, reflecting the carry-forward of the non-renewal of a single sizeable contract with a service provider in the first quarter of fiscal year 2018-19.
On a quarter-on-quarter basis, revenues were down by 1.7%.
The latest round of contract renewals with the US Government (Fall 2019) resulted in an estimated renewal rate of circa 90% in value.
Trends will benefit from an easing comparison base from the Second Quarter onwards. Subject to the availability of the payload on EUTELSAT 5 West B, they will also benefit in the second half from the contribution of the GEO-3 payload of the European Geostationary Navigation Overlay System (EGNOS), under a 15-year agreement with the European GNSS Agency (GSA).
Fixed Broadband (6% of revenues)
First Quarter revenues stood at €19.9 million, down 3.3% year-on-year. Revenue trends in Europe are improving, reflecting the continued roll-out of the PPP program (Preferred Partner Programme) which is gradually being extended to new countries. The contribution of African Broadband remains modest at this stage, but is expected to ramp throughout the year.
Quarter-on-quarter, revenues were down by 4.8%, with the fourth quarter of fiscal year 2018-19 including a positive one-off related to the sale of terminals.
Mobile Connectivity (6% of revenues)
First Quarter revenues stood at €19.7 million, down 7.8% year-on-year. They reflected mostly a negative one-off of circa €1m related to the timing of revenue recognition which will be caught up next quarter. Other effects include notably the carry-forward impact of the end of a temporary wide-beam contract on EUTELSAT 172B in FY 2018-19 offsetting the contribution of UnicomAirNet from January 2019.
Revenues were down by 4.4% quarter-on-quarter.
Trends are expected to improve throughout the year on the back of the gradual materialisation of the pipeline and ramp-up of Maritime business.
Other revenues amounted to €1.1 million in the First Quarter versus €1.2 million a year earlier and (€1.7) million in the Fourth Quarter last fiscal year. They included a negative (€1.7) million impact from hedging operations.
OPERATIONAL AND UTILISED TRANSPONDERS
The number of operational transponders at 30 September 2019 stood at 1,387 down by 29 units year-on-year, principally reflecting the end of life in stable orbit of EUTELSAT 12 West B (satellites in inclined orbit are excluded from the transponder count). They were unchanged versus end-June 2019.
The number of utilized transponders stood at 966, down 10 units year-on-year on a reported basis mostly due to the end of life in stable orbit of EUTELSAT 12 West B. On a quarter-on-quarter basis, the number of utilized transponders was up six units.
As a result, the fill rate stood at 69.7% compared with 69.0% a year ago and 69.2% at end-June 2019.
30 Sep 2018
30 Jun 2019
30 Sep 2019
Number of operational 36 MHz-equivalent transponders 5
Number of utilized 36 MHz-equivalent transponders 6
Note:Based on 36 MHz-equivalent transponders excluding high throughput capacity.
The backlog 7 stood at €4.2 billion at 30 September 2019, versus €4.7 billion at end September 2018, and €4.4 billion at end-June 2019 reflecting natural consumption in the absence of material Video renewals. The backlog at 30 September 2019 does not yet include the multi-year capacity commitments secured on the recently ordered EUTELSAT 10B satellite.
The backlog was equivalent to 3.2 times 2018-19 revenues, with Video representing 75%.
30 Sep 2018
30 Jun 2019
Value of contracts (in billions of euros)
In years of annual revenues based on last fiscal year
Share of Video Applications
STATUS OF EUTELSAT 5 WEST B SATELLITE
Eutelsat is currently investigating an incident on one of the two solar arrays on its EUTELSAT 5 West B satellite and is working to assess the potential impact on the performance of the satellite.
Revenues generated in FY 2018-19 by EUTELSAT 5 West A, which EUTELSAT 5 West B is due to replace, amounted to circa €30 million.
EUTELSAT 5 West B is fully insured against the eventuality of loss by a launch-plus-one-year insurance of up to €173m.
Despite our expectation that the revenues profile for the current year will be back-end loaded, the outturn of the First Quarter is slightly below our expectations, notably due to worsening trends in Data & Professional Video and the unexpected return of a couple of transponders in Russia. Revenues in the coming quarters stand to benefit from:
In this context, based on a nominal deployment plan, we maintain our objective of revenues for the Operating Verticals of between €1,280 million and €1,320 million in FY 2019-20 8, albeit with an increased likelihood of landing in the lower half of this range.
All other elements of the financial outlook are confirmed:
This financial outlook is based on the nominal deployment plan outlined hereunder. Subject to the outcome of current investigations to assess the impact of the incident reported on the EUTELSAT 5 West B satellite, it could be mechanically adjusted.
Procurement of EUTELSAT 10B
A letter of agreement has been signed with Thales Alenia Space for the procurement of a new all-electric satellite, EUTELSAT 10B, scheduled to be operational by 2023. Located at 10° East, the satellite will assure service continuity for existing customers on EUTELSAT 10A, albeit with reduced capacity, while supporting the development of mobile connectivity revenues with two incremental HTS payloads. Firm multi-year capacity commitments representing more than a third of this incremental HTS capacity have already been secured, notably with Gogo, for in-flight connectivity services.
In September Eutelsat unveiled its ELO constellation project targeting the Internet of Things (IoT) market. Starting with the launch of a first series of four nanosatellites, other satellites will progressively be added to the constellation if this new initiative proves successful, to reach a total of 25 satellites operational by 2022. The investment required for the constellation is included in Eutelsat’s existing Capex outlook with a cost per satellite below 1 million euros. In this context, Eutelsat has signed a strategic partnership with leading IoT player Sigfox.
Nominal deployment programme
Since the last quarterly update in July 2019, the launch of KONNECT is now expected to occur in early Q1 2020. This has no impact on FY 2019-20 revenues.
Of which expansion
65 Ka spot beams
~230 Ka spot beams
EUTELSAT HOTBIRD 13F
80 Ku 2
73 Ku 2
EUTELSAT HOTBIRD 13G
80 Ku 2
73 Ku 2
>100 Ku spot beams
c. 35 Gbps
-48 Ku transponders 3
c. 35 Gbps
1 Chemical propulsion satellites (EUTELSAT QUANTUM) generally enter into service 1 to 2 months after launch. Electric propulsion satellites (KONNECT, KONNECT VHTS, EUTELSAT HOTBIRD 13F, EUTELSAT HOTBIRD 13G, EUTELSAT 10B) between 4 and 6 months.
Furthermore, in the context of the kick-off of the ELO constellation, a first series of four nanosatellites (ELO 1, 2 3 and 4) will be launched between 2020 and 2021.
LAUNCH OF LEAP 2 PROGRAM
We are starting the roll-out of our ‘LEAP 2’ cost-savings program, aimed at generating economies of €20-25 million by the end of FY 2021-22. These economies are destined to support the deployment of the group into future growth verticals, namely Connectivity, while preserving our EBITDA margin.
In this regard, we have designed a wide-ranging reorganization project to define the optimum structure for each of our operations. It implies a reduction of circa 100 in headcount outside of France, a global hiring freeze in the legacy businesses and austerity measures within France including a compensation freeze over three years. This project and its measures will be presented to relevant staff representative bodies.
In September 2019, Eutelsat announced its withdrawal from the C-Band Alliance (“CBA”), an organization tasked with the clearing and repurposing of C-band spectrum to make a portion of this band available for 5G services in the United States. Eutelsat wishes to take a direct active part in the discussions surrounding C-band clearing and repurposing in order to better defend its legitimate interest.
Early repayment of €930m Bond
Eutelsat exercised the option allowing the early repayment of the €930 million Bond maturing in January 2020 which was redeemed on 15 October 2019, hence generating €6m savings in pre-tax cash interest in FY 2019-20.
The Board of 30 July 2019 proposed, amongst others, the following resolutions to be submitted to the vote of shareholders at the Annual General Meeting of 7 November 2019:
Furthermore, Carole Piwnica will step down from the Board following the upcoming AGM and the mandates of Jean d’Arthuys and Lord Birt will not be renewed.
Following the next Annual General Meeting and subject to the approval of the above-mentioned resolutions, the Board will be composed of 10 members, 50% of whom are women and 70% of whom are independent.
First Quarter 2019-20 revenues conference call
A conference call will be held on Wednesday, 30 October 2019 at 18.30 CET / 17.30 GMT / 13:30 EST
To connect to the call, please use the following numbers:
Access code: 2789737#
Instant replay will be available from 30 October, 22.30 CET to 6 November, 22.00 CET on the following numbers:
Access code: 2789737#
Note: The financial calendar 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.
Quarterly revenues by application
The table below shows quarterly revenues.
In € millions
Data & Professional Video
Total Operating Verticals
As a reminder, in order to better reflect the different trends of its verticals, Eutelsat made the following changes to its reporting basis:
1 Change at constant currency and perimeter. The variation is calculated as follows: i) Q1 2019-20 USD revenues are converted at Q1 2018-19 rates; ii) Q1 2018-19 revenues are restated from the disposal of Eutelsat’s interest in Eutelsat 25B which occurred in August 2019.
2 Other revenues include mainly compensation paid on the settlement of business-related litigations, the impact of EUR/USD revenue currency hedging, the provision of various services or consulting/engineering fees and termination fees.
3 Subject to availability of the payload on EUTELSAT 5 West B.
4 The share of each application as a percentage of total revenues is calculated excluding “other revenues”.
5 Number of 36 MHz-equivalent transponders on satellites in stable orbit, back-up capacity excluded.
6 Number of 36 MHz-equivalent transponders utilized on satellites in stable orbit.
7 The backlog represents future revenues from capacity or service agreements and can include contracts for satellites under procurement.
8 Based on €/$ rate of 1.14 and current perimeter.
9 Including capital expenditure and payments under existing export credit facilities and from lease liabilities.
10 Based on a €/$ rate assumption of 1.14, excluding hedging impact and based on current perimeter.
11 Subject to the renewal of the resolution relating to share buybacks at the Annual General Meetings.
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SOURCE: Eutelsat Communications
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PUB: 10/30/2019 12:45 PM/DISC: 10/30/2019 12:45 PM